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　　On October 7, a source close to Chery and Jaguar Land Rover revealed that the two companies’joint venture project in Changshu, Jiangsu, which is valued at CNY 10 billion, has already passed the examination of the National Development and Reform Commission (NDRC) and was allowed to launch relevant registration and inauguration.
　　The saying was confirmed by several intermediate and senior executives of Chery and people related with Jaguar Land Rover.
　　“We have received the news from a reliable source that our joint venture project with Jaguar Land Rover has already been licensed though the official approval letter has not been published,” said an insider from Chery.
　　The news about the green light for the joint venture project is widely spread among intermediate and senior executives of Chery. People are excited as they do not expect the approval to be given so quickly.
　　Chery submitted the application about the project to the NDRC in May, 2012, no sooner than it reached a confidential agreement with Jaguar Land Rover. It only took four months for the project to be examined and approved – fastest among all automobilerelated joint venture projects in given years. In comparison, the project that splits Chang’an Mazda from Chang’an Ford, which was given the approval two months ago, waited for 28 months to see the green light.
　　This is also the second joint venture project of Chery that was approved by the NDRC after its cooperation with Qoros Auto. This is also the first time that Chery worked with a worldknown automobile brand. Prior to that, Chery tried to build cooperative relationships with Chrysler, Fiat and Subaru, but failed due to a lot of reasons.
　　
　　 Jaguar Land Rover’s Goal
　　China is the fastest growing market for Jaguar Land Rover since its two brands – Jaguar and Land Rover – entered China in 2003. From then on the sales volume of this company in China kept increasing year by year, even though it had an unsta- ble performance worldwide. In 2005, Jaguar sold only 640 units in China, but in 2010 the number increased to 2,655. In 2011, the sales volume doubled to 5,976. Then, the sales volume of Land Rover in China was only 1,415 in 2005, which increased to 2,709 in 2006. In 2007, 6,573 Land Rover vehicles were sold in China with the 142.6% annual growth rate. In 2011, the number of Land Rover vehicles sold in China increased by 53.8% year on year to 36.1 thousand units. The total sales volume exceeded 42 thousand units, up 61% from the year of 2010.
　　The Chinese market is also getting more important for Jaguar Land Rover. In 2005, the contribution of China to the global sales volume of Jaguar and Land Rover was lower than 1% (0.7% and 0.8% respectively). In 2010, the sales volume of Jaguar in China accounted for 4.9% of its global sales and Land Rover 13.1%. In 2011, China contributed to 12.0% of Jaguar’s global sales volume and 15.5% of Land Rover.
　　However, even though Jaguar Land Rover has seen impressive increase in China, it is still far away from those leading luxury auto brands in China. The traditional top three luxury auto brands – Audi, BMW, and Mercedes Benz – respectively sold 310 thousand, 232 thousand and 198 thousand units in China, greatly paling Jaguar Land Rover’s performance.
　　Therefore, there is still great space for Jaguar Land Rover’s further expansion in China. Since Audi, Mercedes Benz and BMW have already realized localization in China, finding a local partner and producing cars in China is a must for Jaguar Land Rover. As the pioneer of Chinese domestic auto brands, Chery is an ideal partner for Jaguar Land Rover.
　　The cooperation can help Jaguar Land Rover to increase its production capacity and lower the production cost, which are keys to increasing the sales volume. According to the plan of Chery and Jaguar Land Rover, the new project will be put into use in 2014. The initial production capacity is planned to be 130 thousand units, including 34 thousand units of Land Rover Evoque, 43 thousand units of Land Rover Freelander II, 23 thousand units of joint brands and 30 thousand Jaguar cars.
　　In addition, the popularity of Jaguar Land Rover is a great addition to Tata Motors’ plan in China. As the parent company of Jaguar Land Rover, Tata Motor is always interested in the vast Chinese market. Early in 2010, its CEO Carl-Peter Forster said to Chinese media that “China would be the largest auto market in the future and Tata would be delighted to see more products sold in China”.
　　In order to pave the way for Tata Motors in China, Jaguar Land Rover worked as the frontrunner. Forster planned to use the world-known luxury brands to increase the brand awareness of Tata Motors in China before introducing its own lowand middle-end products in China. Now, if Jaguar Land Rover could become more popular in China, Forster’s ultimate plan might be implemented at a faster pace.
　　 Chery’s Goal
　　The other party Chery is believed to be benefited from the cooperation too. For years, Chery always takes the first place in sales volume among Chinese self-owned auto brands. However, it never gets rid of the criticism of complicated brand complex and indefinite positioning. This finally affected Chery’s performance– from January to August of this year, the sales volume of Chery reached 314.2 thousand units, down 15.39% year on year.
　　In addition, Chery’s profitability was a problem as well. In 2008 and 2009, this Wuhu, Anhui-based automaker reported the profits of CNY 314 million and 72 million. However, if the government subsidies were deduced, it actually encountered the loss of CNY 156 million and 561 million. Things got worse in 2010 when Chery suffered the loss of CNY 614 million without government subsidies. In 2011, it reported the profits of CNY 200 million – still lower than its Chinese peer Great Wall Auto (CNY 3.56 billion) and Geely (1.54 billion), let alone its poor 3% profit margin.
　　This is because Chery had held onto the principle of “selling more cars with lower prices”. Someone has made a survey and found that the profit of selling a BMW car equals the one of selling 20 Chery autos. Chen Wenkai, CEO of Gasgoo.com, said that it was the right time for Chery to pursue profits instead of sales volume.
　　Then, the cooperation can help Chery to upgrade its brand image. For consumers, Chery stands for low-class and cheap cars for long. Many people give sideways look at Chery cars with a sneering expression. Chery has been planning to add more glory to its brand image, but its efforts rarely saw the light of success till now. Its own high-end brand “Riich” was harassed by operating problems since it was born and its plans to cooperate with Chrysler, Fiat and Subaru all ended up with failures.
　　The cooperation with Jaguar Land Rover is helpful to change people’s mindset when they saw Chery cars. At least the “brother brand” of Jaguar and Land Rover sounds much better. In addition, Chery could learn the experiences of managing high-class auto brands from Jaguar Land Rover, which might bring twilight for its self-owned high class brands.
　　“As the pioneer of Chinese domestic brands, Chery met many problems in the development. Its product profile, brand power and internal management cast restriction over its future development. Through the cooperation with Jaguar Land Rover could satisfy its demand of improving the abilities in these fields,” said Xu Huchu, partner of and director of auto research team at Booz & Co.
　　Xu Huchu thought highly of the cooperation between Chery and Jaguar Land Rover. “I think the cooperation is very likely to be met with success in the future,” he said.
　　 Public Voices
　　The initiation of the joint venture project between Chery and Jaguar Land Rover raised great concerns in the Chinese automobile industry. Many people cannot wait to express their own opinions.
　　Ge Xuan, a freelancer specializing in auto industry said that Chery could see its brand image improve drastically even though it only acts as an OEM for Jaguar Land Rover. In addition, it could lend Chery a hand when it faces Fuji Heavy Industries during the negotiations about Subaru, stopping the Japanese company from asking the extraordinarily high prices. Then, it could be helpful for Chery’s IPO plan since it will add a high-quality asset portfolio to Chery.
　　But Ge Xuan said that Chery still faces challenges if it really wants to benefit from the cooperation. Firstly, it needs to abandon the thought of earning money quickly from the joint venture. Its ultimate task in the cooperation in to learn advanced experiences and technologies from its partner, laying a foundation for its march towards a world-class auto brand.
　　Secondly, Chery has to make a careful study into the market to find out which Jaguar or Land Rover cars Chinese consumers like and how many are needed there. Thirdly, it needs to take measures to foster a matured management team to match the profile of Jaguar Land Rover. Recruiting senior executives from other companies is an option, but more importantly it should change the corporate culture to turn people’s focus to innovation and creation.
　　Wu Qiong, columnist for the Shanghai Securities Daily, also believed that the joint venture between Chery and Jaguar Land Rover was blessed. But she showed a bit of sadness as the“Chinese domestic auto company has to rely on foreign companies for upgrade and transformation”.
　　In her opinion, China’s method of developing its own auto-making industry, which features “exchanging technologies with market shares”, did not see good results as expected.
　　The said “exchanging technologies with market shares”means that foreign companies need to promise to transfer core technologies to their partners if they want to establish joint venures in China. This sounds good, but is carried out less pleasantly, because most of foreign automakers, especially those luxury automakers, are not willing to tell their secrets to Chinese companies.
　　For example, BMW, Audi and Mercedes Bens have never told their knacks of making beautiful and stable luxury cars to their Chinese partners though their joint ventures have been run in China for years. As a Chinese proverb says, “a master will die of hunger if he teaches all his skills to his apprentice”. No one is stupid enough to do this.
　　“The transformation of China’s auto industry should not be based on posing high requirements for foreign companies in terms of joint ventures. Improving the research and development ability of domestic companies is the right method,” Wu Qiong said.

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