JLR lines up Chinese partner as Far East expansion continues.
Jaguar Land Rover's quest to find a Chinese partner has taken a step closer after it emerged that the firm has formally applied to the country's National Development and Reform Commission to set up a joint venture (JV).
JLR is now waiting for a response from the Commission, but that hasn't stopped JLR shifting some key staff over to China in preparation for the setting up of production. According to recent Chinese media reports, JLR has most likely chosen the firm Chery as a partner in the joint venture. If you haven't heard of it, Chery is the seventh largest Chinese car maker, selling some 700,000 units in 2010.
JLR needs a local partner to get round government regulations that still tax imported cars heavily and require a local partner to assemble locally. Wanting to assemble in China comes as no surprise, as it's sales in such emerging powerhouse economies that are fuelling JLR's big global sales growth. Indeed, JLR's sales in China this year have exceeded 33,600 units, up by 60% on last year.
And it's very much Land Rover and Range Rover that is leading the JLR sales surge. Range Rover in particular offers both a status symbol for the emerging middle classes in countries like Russia, India and China, while the ruggedness of the cars also helps in what can sometimes be challenging environments.
This Land Rover / Range Rover success story in particular is the reason why the firm is ramping up production and taking on an extra 1000 workers at its Solihull plant. The firm has said that its intention in creating the jobs, equal to a 25% increase in the Solihull Lode Lane workforce, is to support new Land Rover and Range Rover product development.
Jaguar, while doing well globally with its new XJ model - isn't seeing anywhere near the same success as Land Rover. In fact, it's very much a 'tale of two brands' at the moment. According to data released by the Indian owner of the two British luxury brands, Jaguar sales actually declined by 5% in November to 5,315 units, while Land Rover reported 38% sales growth to 23,868 units. The Land Rover sales increase was fuelled in particular by high demand for the new Range Rover Evoque.
JLR's owner Tata also announced recently that accumulated sales across both brands so far this fiscal year rose 19% to 185,431 units. But that concealed a 9% fall in Jaguar sales to 35,195 units, while Land Rover sales rose 28 percent to 150,236 units.
Jaguar currently has a limited line up of models and needs a wider product range to hit key market segments - think in terms of an up-market entry-level Jag (filling the space left by the x type), a two seater sports car, and maybe a cross-over Jag as well.
Looking forward, the firm aims to expand production to 300,000 cars in the near future but I reckon that's just the start of what's likely to be a sustained rise in production.
This overall success is not only down to the success of its models, but also the benefit of exchange rate depreciation that has made JLR products - and indeed UK produced cars more generally - more competitive.
It's an exciting time as the firm invests heavily in new models and ramps up production, and shows how the emergence of new economic powers can bring British firms opportunities as well as threats; especially where they occupy high-prestige niches which appeal to the growing class of affluent people in emerging economies around the world.
Professor David Bailey works at Coventry University Business School