Jaguar Land Rover’s Strategy for Growth in China

If there is one British brand that demonstrates the potential for successful trading with China it has to be Jaguar Land Rover (JLR). Ok, so JLR is now owned by Indian conglomerate Tata Group. But, to most consumers Jaguar and Land Rover are quintessentially British luxury brands – and brands which Chinese are demanding in increasing numbers.
Over 80% of JLR's sales are to overseas markets and in 2012 China overtook the UK as JLR's biggest market. In 2012 sales in China grew by 71% to nearly 72,000 vehicles. By 2013, that had risen to over 90,000 vehicle sales in China.
This is a phenomenal success story and is a great illustration of how a brand can exploit the opportunity presented by the emerging affluent middle class in China.

For now JLR cars are imported into China ready-assembled. High import tariffs means that the selling prices in the showrooms of Beijing, Shanghai and other Tier 1 and Tier 2 cities are almost twice the equivalent price in the UK for comparable models.

To establish a foothold in the Chinese market. JLR set up a wholly-owned National Sales Company (NSC) in July 2010 to establish, manage and grow its dealer network there.

However, it must have been clear to JLR that to really succeed in China in the fast-growing luxury car market, it needed to be able to manufacture in China. To do this, it would need to have a joint venture partner (a requirement in China for the automobile sector).

The Chinese government enforces a 50 per cent foreign ownership limit in the car industry and also requires foreign-invested joint ventures to develop Chinese brands – such as GM’s popular Baojun sedan and the Zinoro, an electric vehicle developed by BMW’s China joint venture.

In November 2012, JLR announced that it was to make vehicles in China for the first time after the Chinese Government approved a £1bn joint venture. JLR agreed a deal with Chery Automobile and will build a plant near Shanghai, which is due to open in 2015.

You can learn more about JLR's joint venture with Chery here:

The Shanghai plant will be JLR’s first true manufacturing plant abroad, and will use Chinese parts.

A research and development facility and engine production plant will also built as part of the venture, with the main manufacturing plant expected to be completed during 2014, with production starting the following year.

Initial estimates suggest production volumes at the Shanghai factory could be in the region of 130,000 vehicles a year, which would be similar to those JLR achieves in its UK factories. Other estimates suggest that the factory capacity may be extended in order for JLR to produce up to 200,000 cars per year.

JLR says that being in China will enable it to build vehicles designed specifically for the Chinese market. This is a good example of the concept of localisation – changing a product or service to meet the specific needs of customers in a different geographic location.

A key benefit of the joint venture with Chery is that JLR will have access to a much wider and well-established dealer network across China.

JLR currently has a network of around 150 dealers in most of the main and second-tier cities in China. The joint venture 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.

However, as this Sky News video illustrates, many Chinese consumers are happy to buy existing JLR models, shipping directly into China from the UK-based factories.

JLR's target consumer in China is a affluent middle class and upper class customer wanting to buy luxury vehicles. JLR still has lots of work to do in China to build market share in the luxury car market which is already dominated by three leading German manufacturers. Audi, BMW and Mercedes-Benz collectively control about 80 per cent of the segment. JLR expects the market for luxury vehicle sales in China to double to more than 2.5m units by 2020. What share can JLR grab of this fast-growing market?