Jaguar-Chery: Veto Ahead 奇瑞联手捷豹路虎建合资厂料难获批
I hate to be overly pessimistic, but I have serious doubts about the future of a newly announced joint venture between fading domestic auto giant Chery and luxury car maker Jaguar Land Rover. More specifically, I am quite skeptical that this new tie-up will ever get the necessary approvals from Chinese regulators, which must approve all such major new investments. (English article) Let’s take a quick look at this deal, which was rumored for months before Chery and Jaguar Land Rover, owned by India’s Tata Motors (Mumbai: TTMT), made a formal announcement after finalizing details. The partnership will see the 2 sides invest up to $3 billion to build a manufacturing base in China and develop a specific brand for the market, according to media reports. Previous reports and Jaguar’s own background, coupled with a fondness for high-end cars among China’s new wealthy, all indicate the new venture will produce luxury cars, a sharp break with Chery’s own brand which is distinctly lower market though is also known for reasonably good quality. Chery desperately needs some good news in terms of new domestic initiatives, as the company’s sales have plunged in recent months as foreign joint ventures have stolen market share from domestic rivals amid a broader slowdown in China’s auto market. One of Chery’s few bright spots has been its exports, which have grown sharply in recent months to partly offset the slowdown in domestic sales. Still, the company is at a distinctive disadvantage to many of China’s other major automakers due to its lack of a strong foreign partner. So, the question becomes: is Jaguar Land Rover the partner Chery needs to revive its fortunes? There are a number of good points and bad points to such a tie-up, but in the end I’m betting the NDRC, China’s state planner which must approve the deal, will decide the bad points outweighthe good ones and veto the joint venture. The NDRC will certainly like the idea of developing a new luxury brand for the China market, and it also probably realizes that Chery really needs a foreign partner to compete with many of its rivals. But in terms of choice of partner, Jaguar Land Rover looks like a poor pick due to its small size and highly focused niche market selling very high-end cars with much more limited demand than more mainstream luxury brands like Audi (Frankfurt: VOWG), BMW (Frankfurt: BMW) and Mercedes Benz (Frankfurt: DAI). I do like the idea that Chery is trying hard to improve its outlook and bring in some new ideas from outside to boost its longer term prospects both in China and abroad. But if it’s smart, it will keep talking to other potential partners while it awaits for the final NDRC decision on this deal, which is more than 75 percent likely to be a veto.
Bottom line: China’s state planner is likely to veto a new joint venture between automakers Chery and Jaguar due to limited benefits from Jaguar due to its small size.
Related postings 相关文章:
◙ Chery Finds Foreign Partner in Jaguar 奇瑞与捷豹路虎联姻前景堪忧
◙ China Slams the Brakes on Automakers 中国为汽车行业踩刹车
◙ Geely Eyes Risky New Luxury Route 吉利欲走有风险的豪华车路线
