Chery has agreed to invest US$75m (KRW 108bn) in South Korean automaker KG Mobility (KGM) through convertible bonds, securing an initial stake of around 10%. If the bonds are fully converted near their 2029 maturity, that position could rise to 16.22%. The structure keeps the transaction framed as a financial investment today, while leaving the door open to a substantially larger equity position later.

A partnership built in stages

The bond deal is part of a relationship that has been developing over time.

The vehicle will be built on Chery's T2X platform and offered in both plug-in hybrid and internal combustion engine variants from early 2027. A second joint model, aimed at global markets including Europe, is already planned.

The cooperation extends beyond vehicle programs. Executive-level task forces are being set up to explore joint investment in automotive chips and autonomous driving architecture — an unusual breadth for what is officially described as a financial arrangement.

The manufacturing question

KGM's Pyeongtaek plant has recently upgraded its assembly lines to accommodate EV production, making it a potentially valuable asset for any partner seeking Korean production capacity. KGM Chief Executive Hwang Ki-young, however, has publicly ruled out contract manufacturing:

"Chery vehicles being contract manufactured at its Pyeongtaek plant, nor any concrete plans at present to use its other plants."

KGM's footprint extends beyond Pyeongtaek to Changwon, with manufacturing agreements in Vietnam and Indonesia.

Chery President Zhang Guibang has been more direct about the strategic logic, pointing to tariff asymmetries between markets:

"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'."

Why production access matters to Chery

Chery sold roughly 2.8 million vehicles globally in 2025, with 1.34 million of those going overseas. This export volume is significant, and access to Korean plants would allow Chery to take advantage of the different tariff treatment for Korean-made vehicles in multiple markets.

The convertible structure is significant. Both companies emphasize the investment carries no management role — but the technical and industrial integration is already well underway.

The deferred conversion structure is important: 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. This allows both companies to avoid the scrutiny that a larger upfront equity stake would invite, while the substantive cooperation — platform sharing, joint development, shared facilities — deepens in the meantime.