Chavez touts new "socialist" cars for Venezuela

Venezuelan President Hugo Chavez talks to supporters after arriving from a hospital at Miraflores Palace in Caracas September 2, 2011.

CARACAS (Reuters) - Venezuelan President Hugo Chavez is making a new drive to put his socialist revolution on wheels.

The fiery critic of capitalism is promoting a government-led joint venture with a Chinese automaker that he says will offer cheaper cars to Venezuelans and promote socialist principles on the factory floor.

"This is the revolution advancing," Chavez said. "These quality, good-looking and cheap cars are coming to Venezuela. Only under socialism is this possible."

It is the latest attempt by the populist leader, who will seek a new six-year term at next year's presidential election, to bring Venezuelans cut-rate prices on everything from food to healthcare and housing.

The deal also highlights Chavez's continuing efforts to deepen Venezuela's ties with China, which he has cultivated along with Russia, Iran and Belarus.

The project with China's Chery Automobile plans to produce two compact models in Venezuela, a car-crazed country where prices can be three times as high as those for similar models in the United States or Europe.

"We are going to sell these cars at half -- half -- the price of the capitalist market," Science, Technology and Industry Minister Ricardo Menendez told state television.

A government statement about the joint venture touts the cars' "solidarity" prices.

"This is the result of revolutionary policies designed to improve people's quality of life and combat speculation by multinational companies," it read.

The smaller of the two cars, a two- or four-door hatchback, is expected to carry a price tag of nearly $20,000. A larger, sedan-style car will cost around $28,000.

Chavez recently inaugurated the plant and said he personally named the cars, which are based on current Chery models. Production is expected to start before the end of year.

But some analysts say that while he is pushing the latest offensive in his war against big business, he is failing to address problems for car makers already operating in Venezuela.

CHEAP GASOLINE

Local car production has fallen in recent years, and auto executives complain the South American country's tightly regulated foreign exchange market has dried up access to dollars for assembly plant imports.

Major brands like Ford, Toyota, Chrysler and General Motors manufacture their parts abroad and then assemble their vehicles in Venezuela.

"What Chavez fails to mention is that taxes are a big reason why cars are so expensive here," Raul Alvarez, director of local industry magazine La Guia del Motor, Spanish for the "Car Guide", told Reuters.

Demand for cars, however, remains strong in Venezuela, driven by the cheapest gasoline prices in the world.

Subsidies mean gas sells at the pump for just 0.5 U.S. cents per liter. (0.26 gallons)

And with inflation hovering around 25 percent, many Venezuelans see cars as a hedge against rising prices.

The new car project revives an attempt by Chavez five years ago to produce a capitalism-busting car with Iran. That joint venture, called Venirauto, built cars based on 1980s models and has largely sputtered, struggling to produce 10,000 vehicles a year.

No dealer network or credit facilities were put in place, and some interested buyers complained that the cars ended up going mostly to public officials and other people linked to the government.

Still, the latest plan has drawn interest from some Venezuelans.

On a government Web site announcing the venture, more than a dozen people have posted messages expressing interest in the new cars and cheering Chavez. "What a marvelous idea, comandante," wrote one.

The site said Chavez planned to offer more details during a nationally televised speech in the coming weeks about how Venezuelans will be able to buy the cars.

(Editing by Daniel Wallis and Kieran Murray)