JLR, Cherry joint venture to produce cars in China

Automotive News by  2 yrs ago

The UK-based Jaguar Land Rover, part of Indian auto major Tata Motors had announced that it is firming up a joint venture with Chinese auto major Chery Automobile to start manufacturing of vehicles in China.

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The move comes at an appropriate time by the British premium car manufacturer picking up one of the best and quality concious vehicle maker, Chery to establish a plant in the world's largest car market of China.

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Tata Motors announced yesterday that the two firms have forged an alliance for the manufacture of vehicles under JLR's two iconic brands, Jaguar and Land Rover and other products from Chery's stable.

When the two auto majors announced the formation of a joint venture, apparently, they did not divulge the kind of investment that would go into the deal. Right now, both the companies are waiting for the approval by Chinese regulators. Furthermore, the joint venture would set up an R&D centre in China, besides making vehicles and selling it in the domestic market. Currently, JLR manufactures its vehicles from its three factories located in the UK. China already has major German car makers having forged joint ventures and these firms include Audi, BMW and Mercedes-Benz. In that sense, JLR's foray into Chinese market for a joint venture comes a bit late, but at a right time, so to say.

Though JLR is partnering with Cherry only now, but its two products have substantial presence in the Chinese market. Both Jaguar and Land Rover models have sold in excess of 42,000 cars last year, logging a robust 60 percent growth in contrast with the growth of 2010. The Chinese growth is equivalent to 17 percent of the group's global sales, which had shown upward tick from a mere one percent back in 2005. What is more, China is JLR's third largest market after its home turf and the US market.

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China has a larger apetitite for larger vehicles, with the result JLR's 4x4 vehicles  are selling like hot cakes. It may be recalled that JLR had kick-started the process of scouting for talent earlier this month. In fact, the company has absorbed around 1,000 associates for its facility in Halewood near Liverpool in the UK. JLR makes Evoque and Freelander 2 small SUVs from this plant. Besides that it also manufactures Freelander at its parent company's plant in India and has ambitious plans of penetrating the Indian market, which is now witnessing humungous growth.

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At the Geneva Motor Show 2012, Ralph Speth, Managing Director of JLR had opined that the British Marque was in talks with many vehicle manufacturers in Brazil, discussing about commencing manufacturing of its vehicles in that country.

Chery's plant is based out of Wuhu in China's Anhui province, a location that has China's largest privately owned OEMs are concentrated. Cherry manufactures cars, SUVs besides the production of engines and transmissions. In 2011, Chery's sales stood at 643,000 units and it is the sixth largest car manufacturer in that country. A majority of the local vehicle manufacturers have forged alliance with overseas players, but Chery has not tied up with any auto major so far. So, the joint venture Chery has firmed up with JLR is for the first time.

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Thought Chery had signed an agreement to make cars with Italian FIAT, the project had to be shelved, apparently the reason best known to them. Similarly, Chery called the relationship with Chrysler quits back in 2009. But before that, the two firms had mega plans to work on the production of compact cars and eventually the US auto major had filed for bankruptcy. Though, Chrysler did make a turnaround, the partnership with Chery broke off. After two years, now Chery has decided to work with JLR to make a range of cars from both the sides and sell those products in the burgeoning Chinese market.

Though, other companies have the experience with having partnership with overseas players in China, Chery had some difficulty of sorts with joint ventures. Will the bonhomie and euphoria with JLR by the unproven firm like Chery, only time can reveal. For more automotive and related reports, visit the homepage of Automotive Horizon.

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