The new plant in the Dongsheng district of Erdos is designed to initially produce auto parts and later assemble vehicles with an expected output of 300,000 SUVs, pickup trucks, multi-purpose vehicles a year.

Chery and its partners will invest 20 billion yuan on the Erdos project in several phases before 2015, the statement said. Chery's spokesman Jin Yibo told China Daily that the partners are the company's auto parts suppliers.

Jin said the company made the decision because the nation's northwest where Erdos is located is an important market for SUVs and pickups, accounting for more than one-fifth of the nationwide total.

He added that it is also part of Chery's strategic plan for long-term development.

The move is welcome in Erdos as the local government seeks industries with higher added value and a longer industrial chain to ease the city's high dependence on natural resources for economic development.

In addition to Erdos, Chery now has projects under construction in Dalian, Kaifeng and Wuhu that when complete will enable further expansion of its production capacity, which already tops all domestic car companies.

Its 200,000-unit plant in the coastal city of Dalian scheduled to become operational in the middle of 2011 will make mostly passenger vehicles to be sold in the country's northeast and in overseas markets, the company said.

The automaker's project in Kaifeng in Henan province with a designed output of 280,000 vehicles a year, expected to begin production in February next year, will mainly build minibuses and light-duty trucks.

At its home base Wuhu in Anhui province, Chery began construction on a new 10 billion yuan production and R&D facility scheduled for completion by 2012.

The plant will further increase its output of passenger cars, engines and transmissions. Chery is now capable of producing a maximum of 900,000 vehicles a year at its existing facilities in Wuhu, according to Jin.

He quoted experts as saying that 15 million vehicles will be sold on China's auto market this year, with the figure expected to rise to 25 million and even 30 million over the long term.

"The market still has room (for more cars)," Jin said.

Chery sold nearly 216,000 vehicles between January and April this year, up 58 percent from a year ago.

It set a full-year sales goal of between 700,000 and 900,000 vehicles for 2010, a giant leap from 500,000 vehicles last year.