David Bailey, Birmingham Post, 28th February, 2011
There has been a clutch of news and speculation over the last few weeks about Jaguar Land Rover’s plans for expansion both geographically and in terms of speeding up the development of a new range of cars.
Speculation has been mounting that the firm is in talks with the Chinese firm Great Wall Motors about a potential Chinese Joint Venture which would see JLR assembling cars in China for the first time.
Key rivals like Audi and BMW are already assembling in China and Audi, in particular, have been reaping huge returns after pursuing a long term strategy of getting into the Chinese market.
Great Wall is a small player in China with 2010 sales of around 400,000 cars but, of particular note, is the country’s biggest maker of Sports Utility Vehicles (SUVs) which would fit a planned push of Land Rovers and Range Rovers brands into the country.
Joint Venture deals are essential for foreign firm entry under Chinese regulations if a firm is going to assembly and then sell locally. It’s a key plank of the Chinese Government’s industrial policy to build up the domestic industry and reverse engineer technologies.
Great Wall’s main manufacturing base is in Boading in Hebei province, with expansion plans scheduled at Boading and Tianjin. Any of these could feature in JLR’s plans for a new assembly base in China.
A Great Wall executive has been quoted by Reuters as saying that “the two companies are exploring opportunities for a cooperative effort. Senior executives of Jaguar and Land Rover came over and visited our plant earlier this month.” Another Great Wall executive added that “it’s fair to say that contacts between the two parties have already passed the initial stage, but no final decision has been reached so far.”
However, at the same time, there was some confusion over the reports, with Great Wall’s Company Secretary Xu Hui apparently saying he had not heard of reports linking Great Wall with JLR, nor of JLR senior bosses visiting Great Wall’s plants.
Last October the Wall Street Journal quoted Tata Motor’s CEO Carl-Peter Forster, as saying that the division was in “good discussions” with a Chinese firm. Whilst not going into detail, Forster had stressed that JLR was looking at finding a partner in China “as soon as possible”, adding that “we’re not as strong as we should be (in many markets), most notably in China.”
Meanwhile, JLR is also in the process of setting up an assembly base at Pune in India, which is another huge growth market. It is also in talks with Indian suppliers to supply more components to JLR generally, which are 30 to 40% cheaper than those manufactured in Western markets.
Additionally, in another development, JLR has just entered into a partnership with French 3D technology specialist Dassault Systèmes. The latter will help JLR in Product Development and Lifecycle Management Processes (‘LPM’). The deal will see Dassault’s advanced digital three-dimensional (3D) simulation and development tools being used in JLR’s product development processes, potentially helping in terms of a speeding up of new products.
Does the push into assembly in China and India, and more sourcing of Indian components, mean fewer jobs in the UK?
Not necessarily… JLR has ambitious expansion plans and, if it substantially raises production, that expansion could still support more jobs here in the UK. Pushing beyond the 300,000 units-a-year output level will be critical as to whether JLR employs more workers here in the UK. Developing stylish and attractive new models, like the forthcoming Range Rover Evoque, will be essential to do this. Hence the deal with Dassault to speed up product development,
The firm has a clear strategy of where it wants to go and how to get there. The financial backing of a huge firm in the form of Tata and its willingness to give JLR bosses the freedom to get on with it, are also key to JLR’s prospects.
A case, then, of so far, so good, under Tata’s ownership.
[Source: Birmingham Post]
[Editor’s Note: Professor David Bailey works at Coventry University Business School.]
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