Effective dealership network key to JLR’s success in China
AN effective dealership network will be key to Jaguar Land Rover’s success in China, analysts have said.
The company could be set to benefit from an enlarged sales outlet network under its joint venture agreement with domestic manufacturer, Chery. However, in order to do so, the British vehicle group may have to make a series of concessions to its Chinese partner.
Reports in China say it is understood the two manufacturers will have an equal say in which dealers will distribute the vehicles. Although Chery may opt to expand its domestic dealerships to include the Chinese-produced models.
The Beijing-based Economic Observer said such a decision could see both imported and domestically produced JLR vehicles displayed alongside each other on forecourts throughout China.
The JV is expected to begin producing vehicles at its new plant in Changshu next year. Initial suggestion says production volumes could be in the region of 130,000 vehicles a year.
There are also suggestions that manufacturing facilities will be extended to include a new engine plant and R&D centre.
JLR is keen to exploit growth opportunities in China and currently has a network of around 150 dealers in most of the main and second-tier cities in the country. This will allow it to maximise sales opportunities in the main urban areas. A distribution agreement with Chery would extend this and would mean Chinese-made JLR vehicles could be sold through the Chery’s existing dealership network.
Chery would benefit as 50% of the sales proceeds would belong to it. In a win-win deal for the Chinese firm, it would also be entitled to a share of the profits from JLR’s own dealership sales – should JLR make such a concession.
Such a deal may be in JLR’s best interests as it looks to break the stranglehold imposed on the premium car sector in China by its German rivals, Audi, BMW and Mercedes Benz.
The German triumvirate sold around 800,000 in China during the first three-quarters of the year; a market JLR is keen to grab a slice of and why it may be prepared to bend to Chery’s wishes.
Chinese analysts believe that if any manufacturer can get close to breaking the German monopoly then it is JLR.
In the first three quarters of this year, JLR sold more than 66,500 vehicles in China, an 18% growth on 2012. The premium placed on the Land Rover badge is significant, although Jaguar too is gaining in popularity and when the company begins production of its new small sports saloon in 2015, sales are predicted to be even stronger.
The test could be whether Chinese consumers will be happy to drive a domestically-produced vehicle or whether they will continue to pay the massive import duties which effectively double the price of the vehicle.
However, it is thought JLR will have to act quickly as its former stablemate in Ford’s Premier Automotive Group, Volvo, has also been granted permission to manufacture in China.
Volvo has an initial advantage as it is now owned outright by Chinese company, Geely, so the company will have an established dealership network in which to tap into.
Geely is also owner of Coventry-based London Taxi Company, the firm it created after buying up the assets of the Manganese Bronze-owned, London Taxi International.
