BEIJING -- DaimlerChrysler AG will begin assembling the Chrysler 300 sedan in China using imported kits in September 2006, supplier sources say.
Assembly using parts manufactured in China is scheduled for January 2007. Initial volume will be about 25,000 units annually.
"Chrysler is embarking on a new product offensive for northeast Asia, led by our new flagship, the Chrysler 300C," said Chrysler group CEO Tom LaSorda two weeks ago.
The 300C name refers to all versions of the 300 in markets outside of the United States.
In China, Chrysler will produce sedans with the 5.7-liter Hemi V-8 engine, as well as 2.7-liter and 3.5-liter V-6 engines.
The kits will come from Chrysler's plant in Brampton, Ontario. DaimlerChrysler will begin shipping the kits within weeks to save money on import taxes, suppliers say.
The kits can be stored until DaimlerChrysler's plant in Beijing is finished.
Kits are taxed at about 15 percent. A new regulation goes into effect in January that will raise the tax rate to 25 percent. Local production can't begin immediately because DaimlerChrysler has not lined up enough qualified local suppliers. At least 40 percent of a car's parts must be manufactured locally to avoid paying a higher tax rate, according to Chinese regulations.
"They are trying to ramp up local sourcing," says a DaimlerChrysler supplier in Beijing.
The local sourcing efforts are off to a late start because of internal disagreements between the Daimler and Chrysler parts of the company, suppliers say.
DaimlerChrysler formed a purchasing committee in Beijing several months ago, led by Paul Pak from the Auburn Hills, Mich., office. To achieve 40 percent local content by early 2007, DaimlerChrysler will begin with the body, suppliers say. The body is made with relatively low-tech parts - metal stampings, which are more easily sourced from China.
DaimlerChrysler then must add several other locally sourced assemblies as detailed in China's import regulations, such as an engine and transmission, to meet the local content requirement.
"It will be tough to achieve 40 percent local content by early 2007," says a Shanghai supplier.
The assembly will be done at DaimlerChrysler's new plant in a Beijing suburb.
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