Jaguar Land Rover (JLR) is facing a dilemma in China as it struggles with low volumes and prices for its locally-built cars, while imports generate an average sale price of £101,000. The company’s joint venture with Chery has resulted in a price gulf between the two, leaving JLR with three possible solutions. The first is to pull out of the joint venture and become an importer of high-end models like the Range Rover. The second is to localise the new EMA electric car platform, which could lead to competition from aggressively priced Chinese brands. The third option is to localise the Range Rover’s MLA platform and risk cannibalising production in the UK.
CEO Adrian Mardell acknowledged the problem and said that JLR is close to making a decision on what happens next with the joint-venture plant in Changshu. The plant has run at well below capacity since it was inaugurated in 2014, starting with the Range Rover Evoque. In the last financial year, JLR sold just 50,904 locally-built cars in China, led by the Discovery Sport at 15,493. The most locally-built models the company ever sold in China was just under 88,000 in the 2017/18 financial year.
JLR’s plummet into unprofitability in 2018/19 was caused by China, where it was forced to write down £3.1 billion. Back then, it was discounting heavily to drive volumes, with the consequence that neither the dealers nor JLR were making money in the country. However, JLR said the last financial year was its most profitable in China in five years, driven by the high £101,000 average per vehicle revenue it was pulling from import models like the Range Rover, Range Rover Sport and Land Rover Defender.
One option for JLR is to take a majority stake in its JV, as BMW did last year when it increased its ownership of the Brilliance joint venture to 75%. Media reports in China last year suggested JLR wanted to pursue that course – against the wishes of Chery. Chery itself is looking to enter into the premium category with its electric iCar brand, which could further increase antagonism between the two companies.
JLR’s decision will be influenced by Jaguar’s shift to a luxury EV brand. Last year, around 20,000 of the 51,000 locally-built models sold in China were long-wheelbase versions of the Jaguar XE and XF – making China the last place on Earth where you could easily get hold of one the two saloons as production tailed off in Castle Bromwich. As those models are phased out with Jaguar’s pivot starting in 2025, JLR has a big hole in Changshu to fill if it decides to keep on producing locally.
