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Jaguar Land Rover to start production in China
It was announced on Sunday (18th November) that British car manufacturer Jaguar Land Rover (JLR) has signed a groundbreaking agreement with China-based car manufacturer Chery Automobile (Chery) that will see JLR make vehicles in China for the first time.
The $1.6bn joint venture marks the end of a long period of negotiation between Chery and JLR’s owner, Tata Motors and production is expected to begin in 2015 once the construction of a factory in Shanghai is complete. It signals the company’s first move into overseas production, but JLR has been quick to dismiss claims that the move is the first step towards moving production out of the UK altogether in a bid to cut costs and has stated that any cars produced in China will be in addition to its existing output.
If this is true, then the reasons for the move lie elsewhere. JLR has not hidden its delight at what it called “the understanding and foresight of the Chinese authorities” in approving the venture and referenced the “fast growing Chinese market” in its press release. Herein lie the reasons for the move. Sales of JLR models have increased by 80% in 2012, driven primarily by the success of the Range Rover Evoque, and sales of new cars in China are forecast to grow with a CAGR of 16.5% between now and 2015. China is therefore the land of opportunity.
China has already become a key market for JLR and manufacturing models in China will allow the company to avoid import costs, in turn facilitating more competitive pricing.
In addition to the construction of a car production plant, JLR has announced that it will also build a research and development facility and engine production plant. The hope is that ultimately, the venture will enable the company to build vehicles designed specifically for the Chinese market.
Time will tell if the joint venture proves to be successful, but it signals the importance of China as a market for luxury brands. It would not be a surprise if others follow suit.
For a more detailed understanding of the Chinese New Cars market, see MarketLine’s industry profile: http://store.marketline.com/Product/china_new_cars?productid=MLIP0153-0006
For more information on Jaguar Land Rover, check out MarketLine’s Tata Motors company profile: http://store.marketline.com/Product/tata_motors_limited?productid=10B103C6-24E0-440B-8D11-E901B4F74C24