Sales by Chery hit 500,000 units last year, up 40.5 percent over 2008. Its goal this year is to ensure sales of 700,000 vehicles and reach 900,000 units, according to Jin.

BYD, backed by Warren Buffett and a major rival of Chery, set a sales goal of 800,000 units this year after moving more than 400,000 vehicles in 2009.

Yet why Chery would choose Erdos remains unclear, analysts said. The city currently lacks a mature auto parts industry and is located far from major consumer markets.

A local official in charge of soliciting investment told Guangzhou Daily that Chery could raise funds in Erdos if it lacks money.

Huatai Automobile Group, an Erdos-based domestic carmaker that began to build an auto plant in the city in 2006, reportedly received more than 1 billion yuan in loans from the local branch of China Development Bank.

The official told Guangzhou Daily that the local government planned to hold further talks with Chery after the Spring Festival.

It is reported that the electricity for industrial use in Erdos is cheaper than elsewhere, which could be part of its attraction.

Widely known for its abundant coal reserves, Erdos could use Chery's project as an opportunity to augment natural resource production with manufacturing that brings higher added value and a longer industrial chain.

The city now has several other auto projects already underway.

Zhejiang-based Jinggong Group is building a heavy-duty truck plant in Erdos. A factory by the city's own Zhongxing Special Vehicle Manufacturing Co has been completed, while Huatai Automobile Group has already began to commercially produce engines and gearboxes as well as two SUV models in Erdos.