Chery Jaguar Land Rover (CJLR), a joint venture between Chery Auto and Jaguar Land Rover (JLR), suffered a 20 percent decline in sales during the first four months of operation.
There are three main causes for CJLR’s poor sales, according to CBU’s Jones Zhong, Accenture’s Shen Jun and Roland Burger’s Zhang Junyi.
Firstly, the whole Chinese auto market has been in decline of late. The luxury segment’s growth is also slowing down. CJLR’s sales were inevitably affected by the weak market.
Secondly, the locally assembled Evoque is even more expensive than the imported model. With the ongoing price war, it is not surprising that the Evoque failed to sell. CJLR tried to use the high price to match the Evoque’s high-end SUV image, leave room for the pricing of future models and gaining immediate profitability. The market has proven CJLR has made the wrong decision on the pricing of the Evoque.
Thirdly, CJLR is still going through the break-in period as a new JV. The company is in the process of balancing out the interests of the two partners and fighting out for control over the JV. The internal struggle must have played a role in the failure of CJLR’s first launch.
However, backed by a comprehensive and competitive line of JLR’s SUVs, plus the relatively strong SUV market demand in China, CJLR can turn around if it can make some appropriate adjustments in its operations.
Firstly, CJLR needs to adjust its vehicle price according to the market. It should be more realistic about its investment return. Selling overpriced vehicles to achieve an overambitious sales goal is not a successful business model.
Secondly, Chery and JLR should work together to smooth out the JV’s business operations. There will be no fighting over the control of the JV and the manager team should always put the JV’s interest first, politics and patriotism second. At the end of the day, if CJLR cannot be profitable, it would hurt the politics and patriotism just as bad as the business.
Thirdly, CJLR should give its sales division enough autonomous power without interference from its investors. Investing partners should focus on laying out a long-term strategic plan for the JV. CJLR should not focus on selling imports. Instead, its attention should be locally made vehicles and eventually JV’s own models in order to be successful in China.
CJLR’s current Integrated Marketing Sales and Service (IMSS) is only a temporary solution to JV sales. The IMSS was set up to coordinate between Chery and JLR in the operation of the new JV.
Lastly, CJLR needs more than one vehicle to fight in the market. The new model to be introduced in China towards the end of this year will be a helpful and necessary addition.
Chery could also potentially benefit from the JV, such as absorbing JLR’s advanced SUV powertrain technology and product designs and utilizing its supply chain resources.
If Chery and JLR can work together sorting out the JV’s internal issues and be more realistic about sales and pricing strategy, CJLR will be on the right track to success.
(Rewritten by Kevin Wang based on author’s article published in China’s Automotive Intelligence Pool of 30)