The Chery Jaguar Land Rover joint venture has made profitable progress in quick time to drive itself into a position of considerable strength, and there’s more to come
Joint ventures are all about sharing and learning before any thought of prospering can be pictured. An open mind is of the essence in getting the chemistry right, the promise of compatibility walks hand in hand with the potential for missteps, and made-in-heaven matches are fairy tales. The coming together of Chery Automobile Co and Jaguar Land Rover (JLR) in China had an X factor added to the mix: two partners from distinctly different countries and cultures.
That the entities involved have moulded, within this context, an alliance of consequence and growing heft is credit to the vision and values that brought Chery and JLR together back in November 2012. Nearly five years later, the numbers being notched up by CJLR, as the enterprise is called, tell a story of automotive success that has been built on complementary capabilities, clear-sighted objectives and an uncommon sense of the collective (see Harmony in diversity).
Established as a 50:50 joint venture in Changshu near Shanghai with an investment of about $1.7 billion and a handful of employees, CJLR began production in 2014. The company rolled out the Range Rover Evoque and the Discovery Sport in 2015 and followed that up by unveiling the Jaguar XFL a year later. CJLR now has about 5,500 employees and has sold in excess of 150,000 vehicles.
“It has been a fantastic journey for our people and the two parent companies,” says Murray Dietsch, who has been president of CJLR since late 2015. “This venture has fuelled JLR’s expansion in China, principally on the back of cars that we have made in the country. We have launched three vehicles in 18 months. We made a profit in our first year of production, in the second and now in the third. That’s a tremendous achievement for such a young company.”
For those coming from foreign shores to China to make good in business, figuring out the country, its people and their traditions, its governmental bodies and their ever-changing regulations can be complicated. Chery Jaguar Land Rover (CJLR) has taken the twists and turns of this road in its stride to ensure a smooth ride for the joint venture.
This is especially true with respect to the relationship CJLR has cultivated with its employees, nearly 5,500-strong as of now and growing. “We have brought two completely different cultures, of West and East, together to get to a point where we can trust and respect one another,” says Murray Dietsch, who heads CJLR.
A native of Australia who has settled in Britain and has worked in many parts of the world, Mr Dietsch knows more than a bit about blending in. “Local employees are at the core of our company’s culture and it has taken a lot of time and effort to build this union. It’s about teamwork and collaboration and the endeavour to do things better in the future. That’s the spirit we have nurtured.”
With an average employee age of 28, CJLR is an enterprise that is young in more ways than one, and finding the right balance as it grows from fledgling to maturity has been vital for the venture. A highlight here is that the variances in the Chinese and Western approaches to problem-solving have, instead of becoming a distraction or worse, been turned into an advantage.
“A westerner is head-on when it comes to tackling an issue; the Chinese are much more considerate,” explains Mr Dietsch. “They take a softer approach; they look at it, walk away, think about it, talk to some people, come around to it from a new angle, then think about it again. The outcome may probably be the same, but the way they deal with the issue is distinct. It’s extremely important to understand these cultural differences.”
The amalgam that CJLR has engineered indicates there is no one perfect method of reaching its goal. “This is a big learning for both our Chinese employees and for those of us from outside,” says Mr Dietsch. “We have a small number of people from each of the two parent enterprises and all of us have had to stop, listen, consider and understand how to best run the business here.”
The apprentice and graduate programmes CJLR supports have emerged from such understanding. “We have put a lot of initiatives in place to develop our people, to try and get the right skills,” adds Mr Dietsch. “We spend time at universities speaking to potential employees and encouraging them to come and work for us. Ultimately, it’s down to confidence. People will join you if they feel confident about the company and its future.”
The idea of setting up a joint venture in China had been brewing for JLR from 2010. “China had become our largest market in this side of the world by 2012, and we were selling some 70,000 vehicles a year by then,” adds Mr Dietsch. “We were certain the country would be an even bigger part of the JLR business and that the way to go about it was through a joint venture. What we have done is capitalise on what this market has to offer.”
Cementing the connect with customers has been central to CJLR’s accomplishments in China. “The starting point is making cars that customers readily identify with,” explains Mr Dietsch, an automotive industry veteran who previously worked with Ford Motor Company. “The Chinese market is interesting. Consumer brand loyalty is low as there is so much choice. You need to be able to set yourself apart and be different. The desirability and capability of our vehicles and the great British lineage of the Jaguar and Land Rover brands differentiates us from our competitors.”
Mr Dietsch points to the premium that JLR vehicles command and the British prestige they carry. But going local with its global gold standard in production has perhaps been the critical reason for the company’s China venture getting into cruise control so quickly. “We have been able to demonstrate a rigid approach in meeting the global benchmark for quality that JLR has in place. And we have been able to make our cars more affordable in China.”
If a statement of intent were needed on how crucial JLR considers the Chinese market to be for its future, it came shining forth in July this year. That’s when it opened a new engine plant at CJLR’s existing facility in Changshu, the first such manufacturing unit outside Britain. “We can now go into local production of engines merely a few months after they have been made in the UK. This demonstrates the collaboration with JLR and the speed of CJLR.”
Enabling such speed is down to marvels like the industrial internet, which provides the IT muscle that powers modern manufacturing. Says Mr Dietsch, “We are able to do an enormous number of things thanks to this: design and process layout, virtual builds, automated manufacturing, quality systems deployment, real-time data measurement, electronic part tracking and inventory control. We have acquired an industrial intellect.”
A good example of what an intellect of this kind can deliver is the aluminium technology that CJLR has been betting on. The company opened a state-of-the-art aluminium body plant in Changshu in April 2016 to underline the importance it attaches to the technology. “Our cars are not steel vehicles that have been turned into aluminium; they have been designed as aluminium from the beginning,” says Mr Dietsch. “They weigh less, the dynamics are better and they use less fuel.”
The ecology perspective gets emphasised when electric vehicles are brought into the frame. It’s an established reality that China is the world’s largest automobile market. Not so widely known is the fact that it exceeds Europe and America in electric vehicle sales (some 500,000 were purchased in China in 2016). The country has stated that it will ban the sale of fossil-fuel cars “in the near future”, a foretelling that ties up neatly with JLR’s recent decision to make all its models fully electric or hybrid by 2020.
The fresh frontier is gasoline-free and CJLR is all set to reckon with the inevitable future that’s coming. “We are working with both our parents on electrification,” says Mr Dietsch. “We have plans in place to comply with the requirements for the market. The Chinese government has been frequently updating its regulations and it’s a challenge to keep pace for the industry, but we have a plan.”
Technology aside, CJLR has been adroit in navigating the relationships curve with government bodies, always crucial in making a go of business ventures in China. “You need to understand that governance operates at different levels in this country: local, provincial and central. Relationship building takes time; you have to put in the effort to get the right outcomes and that’s what we are doing.”
This is the first phase of CJLR’s operations and it has a current capacity of 130,000 units a year. Phase two, due to be completed in November 2017, will take the company to 200,000 vehicles. “We will be driven by two factors: organic growth within the Chinese market and new products,” says Mr Dietsch. “We will soon have a new body shop, new press lines, another assembly hall and further capacity expansion in the engine plant we have launched. Our plan is to introduce new vehicles every year leading up to 2020. It’s quite an undertaking.”
CJLR is keeping the competition in its crosshairs and for that it has to stay on the front foot. “As a carmaker we were late coming into the market and we have had to play catch up,” adds Mr Dietsch. “The voice of China is loud and clear, and that voice is being fed back into our development initiatives. It’s been a massive learning experience and there’s still a lot to achieve.”