KG Mobility (KGM) is partnering with China's Chery Automobile to explore future business opportunities. The collaboration will kick off with the launch of a new vehicle next year, followed by joint efforts in robotics, semiconductors, and other sectors. However, concerns persist regarding cooperation with Chinese companies amid increasing U.S. scrutiny.
On August 2, KGM held a press conference at the Grand Hyatt Seoul in Yongsan to announce the completion of a strategic investment agreement with Chery Automobile, valued at $75 million (approximately 110 billion won). The agreement primarily involves securing short-term foreign currency funds to pay technology usage fees to Chery.
The two companies initially established their relationship through a platform licensing agreement in 2024, followed by a joint development agreement for mid-size SUVs last year. This latest strategic investment is part of that ongoing collaboration.
The first tangible outcome of their partnership will be the mid-size SUV 'SE 10,' with plans to launch both plug-in hybrid (PHEV) and gasoline models in early 2024. Additionally, they aim to develop a strategic vehicle targeting major global markets, including South Korea, China, and Europe, as their second joint project.
Beyond automobiles, the two companies plan to collaborate in various future business sectors. KGM Chairman Kwak Jae-sun stated, "We will not only enhance our cooperation in the automotive sector but also explore how we can connect and utilize our respective strengths and technology networks in industries such as robotics, semiconductors, raw materials, and steel. We have decided to form a task force to discuss various possibilities."
However, the fact that Chery is a Chinese company raises ongoing concerns. The U.S. has been tightening regulations on the entry of Chinese automotive companies into its market. Recently, the U.S. Senate Commerce Committee passed the '2026 Vehicle Security Act,' which restricts the entry of Chinese vehicles into the U.S.
As a result, there are predictions that Mercedes-Benz, which has nearly 20% Chinese ownership, could face a halt in sales within the U.S. This has raised alarms about KGM's expanding cooperation with Chinese automakers. Notably, through this investment agreement, KGM plans to issue convertible bonds (CB), which could allow Chery to convert them into shares, potentially giving it around a 10% stake in KGM.
KGM CEO Hwang Gi-young addressed these concerns, stating, "A stake of around 10% will not pose any issues regarding management control. This investment signifies a commitment to closer cooperation between the two companies and will not lead to management participation in the future."
* This article has been translated by AI.
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