Chery, Jaguar in PR Push for JV Approval 奇瑞、捷豹开展公关，争取合资企业获批

Six months after announcing their plans for a joint venture, fast-fading domestic car maker Chery and its luxury partner Jaguar Land Rover are playing a PR game as they try to get regulators to approve their tie-up. Both companies desperately want to see this venture move forward for their own reasons. Chery needs the venture to breathe new life into its business as it faces a growing number of setbacks both at home and abroad. Jaguar also desperately wants to boost its presence in the world’s fastest growing luxury car market, where the big German names are already well established and US giants Ford (NYSE: F) and GM (NYSE: GM) are also planning new initiatives.

Chery and Jaguar announced their joint venture back in March, and have been largely quiet since then as they await for approval from Chinese regulators who are increasingly skeptical of new tie-ups in an already crowded auto market. I previously predicted the regulator was likely to veto this deal, as Jaguar Land Rover is a relatively small player in the luxury segment and would have relatively little to offer Chery, which has traditionally focused on cheaper cars popular in smaller cities. (previous post)

Now we’re hearing that Jaguar Land Rover has chosen China as the official global launch site for its newest models, which it was showing off this week at the Chengdu motor show. Specifically, the company debuted its new 13MY Ranger Rover Sport SUV at the show, as well as its 13MY Jaguar XJ. (English article)

I don’t want to sound too cynical, but I’ve been in the media business long enough to know that the timing and location of Jaguar Land Rover’s debut for its newest models looks like a major public relations exercise designed to please Beijing regulators as they decide the fate of the Jaguar-Chery joint venture.

Regulators will no doubt be pleased to see a major global brand making this kind of worldwide debut for its new models in China, since such debuts are more typically held in more developed markets in North America, Europe and Japan. Those same regulators will also undoubtedly be happy that Jaguar has chosen the relatively obscure interior city of Chengdu for the launch, since Beijing has placed big emphasis on development of the country’s poorer interior provinces over the last decade.

Chery’s name has been absent from this latest PR offensive, but a rapid deterioration of the company’s business over the last six months means it is probably even more desperate than Jaguar to receive approval for the joint venture. Even before the tie-up was first announced, Chery’s position in China’s domestic auto market was on a sharply downhill slope as it lost steady market share to more experienced ventures backed by big foreign names like GM and Volkswagen (Frankfurt: VOWG).

Chery suffered yet another setback at home last month, when it said it was officially closing down Rely and Riich, 2 higher-end brands it had launched in 2009 to try to complement its traditional lower-end products. It also suffered a big setback on the more promising global stage last month when it announced that it was recalling cars sold in Australia, Singapore and several South American countries because some of their components contained asbestos, a known carcinogen. (English article)

For its part, Jaguar wants desperately to get into the world’s fastest-growing luxury car market, where it would already be years behind German rivals including Audi, Mercedes (Frankfurt: DAI) and BMW (Frankfurt: BMW), which all already have China joint ventures. The market is already looking set to become even more crowded, with GM and Ford both recently announcing plans to produce their Cadillac and Lincoln luxury brands in the market at existing joint ventures. (previous post)

I suppose I should commend Jaguar and Chery for their latest PR move, which does indeed seem well conceived and is likely to leave a good impression on status-conscious Chinese officials. But at the end of the day, this last-ditch move, together with strong behind-the-scenes lobbying by both companies, are still likely to fail for the reasons I previously mentioned. All that said, look for a final decision from the regulator probably by the end of this year, with the chances of a veto at 70 percent or higher.

Bottom line: Jaguar’s decision to globally debut its new models in China is a PR move designed to win approval of its new joint venture with Chery, even though the new venture is likely to get vetoed.