Finally putting a name to the Jaguar and Land Rover’s Chinese manufacturing partner, – the Tata’s announced they would be partnering with Chery, China’s largest automakers to bring passenger cars and light trucks to India. The proposed JV, for which they are still to get approval will build vehicles under the Indian group’s brands, and under those of the joint company itself. The two companies did not disclose financial terms of the deal.
The proposed JV will be set up in Changshu, Jiangsu province, a city about 100 km Northwest of Shanghai. The location will be next to the production site of Qoros Auto Co Ltd, a 50-50 joint venture established by Chery and Israel Corp in December 2007, using 3.4 billion yuan (US$537.9 million) in registered capital. The proposed venture, with an estimated investment of 17.5 billion yuan, (US$2.7 billion) will start vehicle production in July 2014, reports said. The venture will initially make Land Rover SUVs, followed by Jaguars in the second phase.
The India-China, Tata-Chery, deal comes at an interesting time, – not only is it when the Chinese consumer is transforming and evolving from choices of vanity to those of value, but it’s also a time when just before the BRICS Summit in New Delhi next week, the issue of a ballooning bilateral trade deficit is being swept out from under the rug again. Analysts and political pundits are once again pooh-pooing the trade deficit which is in China’s favour. Armed with electrical engineering products that contribute significantly to India’s infrastructure, and are 30 percent cheaper, India in some sense, has no choice but to import from China. The debate revving up though asserts India’s authority in China. Many argue, that India should take a page from China’s own industrial policies. India’s leaders should demand that Chinese companies wishing to remain major suppliers to Indian companies start manufacturing in India. As the size of India’s market for manufactured goods continues to grow, this would also become an increasingly attractive strategy for Chinese companies.
Meanwhile, the even though the luxury car market in China is heating up, 950,000 high-end vehicles were sold last year, analysts expect JLR to have a good run. Land Rover is already popular in China and its sales have surged 60 percent to 42,000 units, 7.2 percent of Jaguar Land Rover’s revenue in the quarter to end-December, contributing more than the UK, the birthplace of the two brands. An obvious cost cutting choice, the decision to move to China to manufacture for the world is a wise one. JLR, which was acquired by the Tata’s in 2008, will also export its luxury vehicles to the Indian market which in comparison to China, is just waking up to the segment.
The Tata’s will be competing against the likes of GM, Volvo, Mercedes Benz, Volkswagen and Audi, which is one of the highest grossers in the Chinese auto sector. Gaining final approval for the JV from Beijing might be difficult, Beijing recently raised the bar for new entrants removing the auto industry from a list of encouraged industries, making it tougher for foreigners to win new auto projects.