Brilliance China Auto, German luxury car maker BMW's Chinese mainland partner, hopes to work with an Egyptian company to build a plant in the African country to assemble its self-developed Zhonghua sedans.

"We are in final talks and expect to clinch a deal next month or in April," said an official from Brilliance Jinbei Automobile Co Ltd, the manufacturing unit of Hong Kong-listed Brilliance China Auto.

The unnamed Egyptian firm will invest to build the plant with technical assistance from Brilliance Jinbei, based in Shenyang, the capital city of Northeast China's Liaoning Province, the official said.

Brilliance Jinbei will ship components from the mainland to the plant to build Zhonghua sedans.

If the deal comes true, Brilliance will become the latest Chinese automaker to assemble own brand vehicles abroad.

Other Chinese automakers, such as Chery Automobile from Anhui Province and Zhongxing Automobile from Hebei Province, have built plants in Iran, Egypt, Viet Nam and Turkey.

"We should set our sights on both the domestic and foreign markets. Building assembly plants overseas will enable us to explore overseas markets faster than direct vehicle exports," the official told China Daily.

Brilliance Jinbei started vehicle exports during the third quarter of last year. The official said that it aimed to export 6,500 automobiles this year, up from more than 100 units last year.

The company's main overseas markets currently include the Middle East, Africa, South America and Russia, he said.

"Chinese automakers could also enjoy cheaper land and labor costs to produce vehicles in those markets, which are mostly in developing nations, than in the Chinese mainland," said Qian Pingfan, an industrial researcher from the State Council Development Research Centre.

Chery plans to build new assembly plants in a number of countries, such as Pakistan, Venezuela and Syria.

"Those Chinese automakers building assembly plants overseas are less competitive players in the domestic market than the foreign auto giants. Therefore, it is a fairly good way for them to survive by entering developing countries' markets," Qian said.

Brilliance Jinbei's sales dropped to 72,600 vehicles last year from 101,000 in 2003 mainly due to fierce competition in the domestic auto market.

The company, which also makes Haice vans, has an annual production capacity of 100,000 units.

China's vehicle exports have been skyrocketing in recent years but remain tiny compared with the nation's vehicle imports.

The nation exported US$779 million of vehicles last year, up 93.3 percent from 2003, according to official statistics.

In contrast, the value of China's vehicle imports totaled US$5.4 billion last year.

All of the world's major automakers, such as General Motors, Toyota, Ford, Volkswagen, DaimlerChrysler, Nissan-Renault, PSA Peugeot Citroen, Honda and BMW, have established vehicle joint ventures in China. And they control almost 90 per cent of China's car market.

Total sales of vehicles made in China increased 15.5 percent year-on-year to 5.07 million units in 2004, including 2.33 million cars.

That growth tumbled from 34 percent in 2003.

Brilliance China Auto operates a joint venture with BMW in Shenyang, producing BMW 3 and 5 Series sedans.

Brilliance China Auto closed at HK$1.69 (US$0.22) per share yesterday, down 1.74 percent.

(China Daily February 25, 2005)