Chery Automobile

Chery goes upmarket in link with Jaguar

The partnership will also help the Tata brand to produce cheaper cars in China

PUBLISHED : Tuesday, 20 November, 2012, 12:00am
UPDATED : Tuesday, 20 November, 2012, 3:51am

Chery Automobile is expected to gain from its joint venture with luxury car maker Jaguar Land Rover, but the challenge to create its own high-end brand remains.

The venture, which plans to produce the first batch of 130,000 vehicles in 2014, will lower the cost and the prices for Britain's top sedan and SUV brand in China - the world's largest car market.

China has become the biggest overseas market and the most important growth engine for Tata Motors' Jaguar Land Rover.

From January to October, the brand sold 53,186 cars in the country, up 81 per cent from the same period last year.

To partner with a Chinese car maker "is the only way for Jaguar Land Rover to catch up with rivals like Volkswagen's Audi or Daimler's Mercedes-Benz in China", said Yale Zhang Yu, the managing director of market and industry research firm Automotive Foresight (Shanghai).

"As China's luxury auto market will keep growing rapidly despite a slowdown in the overall industry, Chery Auto will definitely get a significant boost in profit by producing and selling Land Rovers," he added.

Anhui-based Chery and Jaguar Land Rover on Sunday said they would invest 10.9 billion yuan (HK$13.5 billion) to set up a 50-50 venture to build a factory in Chiangsu, Jiangsu province.

The company did not say which models will be built at the new factory.

The joint venture will also set up a research and development centre, build an engine plant and launch a new brand tailored for the domestic market.

But some analysts are not too upbeat on the plans to create a new high-end brand.

"A foreign company would not put the best technology in a joint-venture brand. It's very likely to be an old model with some tweaks and a new logo, just like what other automobile joint ventures have done," Zhang said.

Earlier this month, Chery announced that it had formed an alliance with fellow mainland company Guangzhou Automobile Group - the partner of Toyota and Honda - to share core technology and management experience.

Zhang Zhiyong, an independent market observer, said the company would face more risks by taking such aggressive steps in a slowing market.

"Chery's strategy is to work with local and foreign partners to realise its plan to transform itself into an upmarket manufacturer," Zhang said.

"Yet, each project will demand huge investments. It'll be a challenge for Chery, which has been short of cash of late."