Legend has it that when China’s Chery car company started looking beyond its national borders for sales, its name should have been translated as Cheery but someone missed an “e”. True or not, the company has plenty to be cheerful about in South Africa at the moment.
Twenty months after returning to the local market, it passed 20,000 car sales last week. In June, it sold 1,402. They were all Tiggo SUVs, making Chery one of the top brands in this market category.
Other car styles, including electric models, are likely to follow eventually, but for now the brand is content to cement its presence in a single niche.
It’s quite a turnaround from Chery’s earlier excursions into South Africa, when its vehicles were marketed and distributed by local companies. Then, Chinese brands had a lousy reputation here — they were perceived as cheap but little else — and Chery was one of several to quit the market.
When it returned in November 2021, Chery Auto South Africa was a wholly owned subsidiary of its Chinese parent company, with full sales and after-sales support.
As executive deputy GM Tony Liu admits: “Chinese brands had a reputation for poor quality and no customer backup. That perception hasn’t disappeared completely, but it is changing.”
Chery, alongside another Chinese brand, Haval, has led that change but other brands are also now aiding the transition. “A lot of customers are talking positively about Chinese quality and technology,” says Liu.
Chery’s cause is aided by its 10-year, 1-million kilometre engine warranty — proof, it believes, of its long-term market commitment. Other brands, notably the Koreans, offer long warranties as part of their standard fare but no one has specified the magic million before.
The warranty also applies to Omoda, Chery’s secondary car marque launched internationally last year and a newcomer to the South African market.
Whether anyone will ever get full value from the warranty is doubtful. It’s available only to a vehicle’s first owner, who must drive an average 100,000km annually for a decade to reach the limit.
For those not convinced of the wisdom of driving the equivalent of 2½ times around the world every 12 months, Chery this week signed a deal with Absa to offer extended warranty and service plans on selected Chery and Omoda vehicles.
If South Africa wants to remain a big exporter, it has to go green. I appeal to the government to support this
— Tony Liu
That should help address one of the challenges faced by motor companies enjoying rapid market growth. There are several examples of imported brands that boasted impressive initial sales, then bombed because their after-sales network lacked capacity to service them.
Chery South Africa achieved another milestone last month when it signed its first major deal with a car rental company. Hertz South Africa took delivery of 100 Tiggo 4 Pro models. That’s an important step in the acceptance of any brand. In years gone by, rental companies avoided Chinese brands because of doubts about their quality and resale value.
So far, Chery South Africa has limited its marketing activities to the domestic market and neighbours Namibia, Botswana and Eswatini. Liu says discussions are under way to extend this reach. Zimbabwe, Zambia and Mauritius are already in Chery’s sights. Other countries could follow.
But not everything is sweetness and light. Liu identifies two clouds on Chery’s local horizon. One is that Chinese cars attract a 25% import duty when they arrive in South Africa, compared with the 18% on vehicles from Europe.
“For us to be also 18% would create more competition and benefit South African customers,” says Liu.
Such a deal is not a priority for South Africa. Automotive trade with China is already weighted overwhelmingly in the Asian country’s favour. In 2022, China exported R34.5bn of vehicles and components to South Africa. Just R351m travelled in the other direction.
South Africa’s trade with Europe and other regions is much more balanced — helped mainly by the fact that South Africa builds and exports hundreds of thousands of European, American and Japanese cars, as well as components for overseas assembly plants.
There’s no such relationship with Chinese companies despite repeated assurances by Beijing Automotive Industrial Co that its Eastern Cape assembly plant, co-funded by the local Industrial Development Corp, is about to start building cars.
Chinese truckmaker FAW, a growing presence in the market, builds vehicles from imported kits.
Liu hints that Chery would one day like to build cars locally but says sales are currently well short of the volumes required to make it cost-effective. There’s also the uncertainty about future demand for South African vehicles — the second cloud on his horizon.
While the rest of the world moves to electric power, nearly all the vehicles made in South Africa are powered by petrol and diesel internal combustion engines (ICE). The government should have published a white paper in 2021, outlining its plans to support an electric transition. This is now expected only in 2024.
More than two-thirds of South African-made vehicles are exported — the overwhelming majority to countries that will ban ICE in the next few years. If the local electric transition doesn’t happen in time, the motor industry could shrink drastically.
Like other South African vehicle manufacturers and importers, Chery would welcome policy clarity. Liu says: “If South Africa wants to remain a big exporter, it has to go green. I appeal to the government to support this.”
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