Chery Auto plans to build a 1.77 billion yuan ($259.26 million) plant in central China's Henan province to tap the fast-growing minibus market, CCTV.com reported today, citing local government sources.

Chery President Yin Tongyao recently met in Zhengzhou city with Xu Guangchun, Party chief of Henan province, and agreed to build an auto plant in nearby Kaifeng city with an annual production capacity of 200,000 minibuses, 80,000 light-duty trucks and agricultural machines.

As the central government encourages vehicle sales in the vast countryside, the minibus market is attracting many automakers including Chery Auto. Sales of China-made minibuses surged more than 60% year-on-year to 1.08 million units in the first seven months of this year.

Chery Auto launched its mini-vehicle brand Karry in January and plans to launch four new mini models this year. With a rural population of nearly 100 million, Henan province is a promising auto market, especially for minibuses.

Henan already ranks second on Chery's list of provincial sales after Shandong province and is seen as a priority market by the car company, whose sales and service network is extending to towns and remote villages of Henan.

Chery's future Kaifeng plant can benefit from local preferential policies, which are worked out as part of the province's strong ambition to develop its auto industry.