DaimlerChrysler is in talks with Chery about selling small cars made by the ambitious Chinese manufacturer in Europe and the US, according to insiders at both companies.
The two carmakers are discussing making small vehicles under the Dodge brand for sale in the developed world, said one Chery executive involved in the talks.
The negotiations are part of DaimlerChrysler's efforts to build a low-cost manufacturing base for small cars after deciding that it was not economically viable to do so in the US. They are also likely to add to concerns in the US car industry about competition from China.
For Chery, one of a group of Chinese car companies that are preparing an export drive, any eventual deal would give it access to the marketing and distribution expertise in the developed world that it lacks. The official would not say how close the two were to reaching agreement.
This month, Dieter Zetsche, DaimlerChrysler chairman, said the company was in talks with a number of carmakers in Asia about exporting sub-compact cars to North America.
Last year, a DaimlerChrysler board member said at a car show in Shanghai that the company was considering setting up a joint venture with a Chinese manufacturer to export cars back to the US.
However, after coming under criticism from trade unions in the US, the company later played down the idea.
Brilliance Auto, the Chinese partner of Germany's BMW, said yesterday it had secured a dealer to export 3,000 Zhonghua saloons to Europe for the first time.
The only carmaking multinational to begin exporting cars to developed countries from China is Honda, which started shipping the Jazz hatchback to Europe last year.
Last year Chery announced plans to begin selling a range of cars in the US and Europe from 2007 and signed a deal with Visionary Vehicles whose founder, Malcolm Bricklin, was responsible for bringing the Yugo to the US. However, the company has had difficulty securing dealers in Europe and this month Mr Bricklin admitted that Chery might have to wait until 2009 to begin exporting to the US.
Other Chinese companies looking to export to Europe and the US include Geely, Jiangling, Lifan and Shanghai Auto.