While KGM denies any concrete plans for contract manufacturing, Chery’s own president has explicitly noted how valuable this could be. By Stewart Burnett
Chery has agreed to invest US$75m (KRW 108bn) in South Korean automaker KG Mobility (KGM) through convertible bonds, giving the Chinese automaker an initial stake of around 10%, rising to as much as 16.22% according to Korean financial media if the bonds are fully converted near their 2029 maturity. The deal extends a partnership that began with a platform-licensing agreement in October 2024 and a joint SUV development deal in April 2025; while unconfirmed, the deal opens the door for Chery to use KGM’s facilities as an overseas production hub.
For now, however, the two companies will jointly develop a mid-size SUV, codenamed SE-10 and positioned as the successor to KGM’s Rexton. The as-yet-unrevealed model will be built on Chery’s T2X platform and offered in plug-in hybrid and internal combustion engine variants from early 2027. A second joint model aimed at global markets including Europe is already planned, as well as an extended-range electric vehicle (EV).
The cooperation extends well beyond cars, touching on semiconductors, robotics, raw materials and steel. Indeed, executive-level task forces are being set up to explore joint investment in automotive chips and autonomous driving architecture specifically. Both companies took pains to emphasise that the investment gives Chery no role in, or influence over, management.
In remarks to local media, KGM Chief Executive Hwang Ki-young explicitly ruled out Chery vehicles being contract manufactured at its Pyeongtaek plant, nor any concrete plans at present to use its other plants. Pyeongtaek has recently upgraded its assembly lines to accommodate EV production. KGM also operates a plant at Changwon, also this focuses on ICE production exclusively, and has manufacturing agreements in both Vietnam and Indonesia.
On the other side of the table, however, the tariff logic behind the deal is being stated openly. Chery President Zhang Guibang said directly that Korean-made and Chinese-made vehicles face different tariff treatment in various global markets, which therefore means that cooperation across each other’s global production bases “could be beneficial to each other”. That logic makes KGM’s Pyeongtaek plant in particular more valuable to Chery as export infrastructure than the current public denials about contract production suggest.
The deferred conversion structure matters here too: Chery’s stake only converts from bonds to shares years out, near the bonds’ 2029 maturity, which keeps the investment framed as a financial move rather than anything strategic for now. Thus the two companies can evade the management-control scrutiny that a larger upfront equity stake would invite, while the substantive cooperation—platform sharing, joint development, shared facilities—deepens in the meantime, ahead of any formal governance role.
It should be noted that both sides are working from a template that already exists in the Korean market. Geely took a 34% stake in Renault Korea back in 2022 and now produces the Polestar 4 at Renault’s Busan plant for both domestic sale and global exports. Given that both Geely and Chery are Chinese automakers, it is hard to ignore the overlap or Chery’s explicit allusions to manufacturing access.
While BYD may attract more headlines for its overseas growth, Chery remains China’s largest car exporter, having sold roughly 2.8 million vehicles globally in 2025, of which 1.34 million—nearly half—were overseas. This marked a 17.4% increase in overall sales year-over-year, and extended the automaker’s run as China’s top passenger vehicle exporter for 23 consecutive years. It also said it remains interested in entering the US directly but has no concrete plan given regulatory hurdles, and would consider entering Korea under its own brand if consumer demand justified it.
The specific language both companies use publicly, that management control isn’t affected, that contract manufacturing isn’t under consideration, is doing a lot of work to describe an investment structure explicitly designed to let exactly those things happen later without appearing to today. Chery gains staged access to an export-heavy Korean automaker and its global plants years before it needs to say so plainly, following the same route Geely has long-since proven is doable in this market.