China’s Chery Automobile has agreed to acquire convertible bonds totaling $75 million in South Korean automaker KG Mobility Corp, the Korean company said. If those bonds are converted into equity, Chery would hold roughly a 10% stake in KG Mobility.
Speaking at a press briefing in Seoul, Zhang Guibing, president of Chery International, highlighted the potential for leveraging Chery’s global production footprint. "Chery has many manufacturing bases around the world. We believe these locations could become key areas for future cooperation between our two companies. For example, we could explore sharing global production capacity and collaborating across various aspects of manufacturing," Zhang said.
Zhang also pointed to distribution and brand cooperation as additional avenues of collaboration. "We also see many other opportunities for cooperation, including distribution channels and even brand-related collaboration," he said.
The two automakers described their agreement as the start of broader operational and strategic cooperation. A joint task force will be formed to investigate collaboration opportunities in semiconductors, robotics, raw materials, steel and other inputs, KG Mobility Chairman Kwak Jae-sun said.
Chery framed the investment in the context of its overseas expansion goals. "One of our key objectives is, of course, to strengthen our presence in overseas markets," Zhang said. The company is identified as China’s largest car exporter.
Zhang confirmed Chery is actively exploring options to enter the U.S. market, but stressed that doing so would require compliance with an extensive array of U.S. laws, regulations and other requirements before any market entry could occur.
On product plans, KG Mobility said it remains on track to introduce a midsize sport utility vehicle codenamed SE-10 in January, built on Chery’s T2X vehicle platform. The SE-10 will be offered with gasoline and plug-in hybrid powertrains for both domestic and overseas markets.
When asked about U.S. exports of the SE-10, KG Mobility Chairman Kwak Jae-sun said: "The company has no current plans to export the model to the U.S. market, but remains open to the possibility."
KG Mobility, the company formerly known as SsangYong Motor, sits behind Hyundai, Kia and General Motors in South Korea’s new-vehicle rankings. The SUV-focused manufacturer sold more than 55,000 vehicles in South Korea and overseas during the first half of the year, with exports accounting for roughly 60% of total sales.
Market reaction to the announcement was reflected in KG Mobility’s trading session data shown with the company identifier 003620. The stock was shown down 6.51%, to 2,655.00 KRW, on the trading display included with the company’s update.
Context and implications
The convertible-bond investment formalizes a closer commercial relationship between an established Chinese auto exporter and a South Korean SUV maker that has significant export activity. Their partnership covers production planning, distribution, platform sharing and an exploratory agenda across semiconductors and industrial inputs. While the companies signalled openness to additional markets, including a potential U.S. route, any entry into the United States would require compliance with extensive legal and regulatory obligations.
Next steps
- Formation of a task force to study cooperation in semiconductors, robotics, raw materials, steel and related areas.
- January launch of the SE-10 midsize SUV on Chery’s T2X platform with gasoline and plug-in hybrid variants.
- Potential conversion of bonds into shares, which would grant Chery about a 10% equity stake if exercised.