SGMW has begun production at its third plant in China, while JLR has begun construction of its first plant in China with joint-venture (JV) partner Chery.
IHS Automotive perspective | |
Significance | Jaguar Land Rover (JLR) currently has no local production in China and relies heavily on imports. It therefore urgently needs to have a local production base to grow volume sales in China, but production is only slated to begin in 2014. SGMW – the three-way GM JV – is running at full capacity and needs the new base to allow its new Baojun passenger-car brand to grow. |
Implications | With local production of its Land Rover models moving to the new Chinese plant, JLR will see Chinese sales grow by over 200% in 2015 compared to 2010. SGMW will see sales rise on the back of new models, including a sports utility vehicle (SUV) slated to be produced at the new plant. |
Outlook | Both SGMW and the JLR-Chery JV will depend on SUVs for strong growth in China as this market continues to be a strong growth segment of the passenger-car market in China. |
SGMW opens new passenger-car plant in China
SAIC-GM-Wuling (SGMW) – the three-way JV between GM China, SAIC, and Wuling Motors – has opened a new passenger-car plant in Liuzhou in China's Guangxi province, the company has said in a press release sent to IHS Automotive. The new plant has had a total investment of 8 billion renminbi (USD1.282 billion) in the first phase of construction. The 2-million-square-metre plant has an annual total production capacity of 400,000 units. A powertrain plant capable of producing 400,000 engines is currently under construction and will begin operations in September 2013. SGMW was established on 18 November 2002, in which SAIC has a 50.1% stake, GM China a 44% stake, and Wuling Motors a 5.9% stake. The JV, which is based in Liuzhou, manufactures and sells a range of Wuling brand mini-trucks and minivans, as well as the Baojun passenger-car brand. In 2011, SGMW sold 1,285,820 vehicles in China.
JLR begins construction of passenger-car plant in China
Meanwhile, JLR and Chinese automaker Chery Automobile have together laid the foundation stone marking the beginning of construction of their first JV plant in China. The plant is located in Changshu in China's Jiangsu province and has a total investment of CNY10.98 billion. The plant will build JLR-brand models, as well as a new JV brand. The equal partnership will be called Chery Jaguar Land Rover Automotive Company Ltd. In addition to established vehicles, the partnership will also produce models for a domestic brand tailored specifically to local customer demand, the company has said in a press release. The two companies plan to complete the Changshu facility in Jiangsu province during 2014. Construction of a new engine plant for production of fuel-efficient engines is also included in the JV partnership agreement.
Outlook and implications
The new passenger-car production base will give SGMW room to grow. In China the JV currently has three existing production facilities: Liuzhou East, Liuzhou West, and a plant in Qingdao. However, all three are running above capacity and therefore SGMW was in need of a new base. The new base, also in Liuzhou – referred to as the Liudong plant – will now focus on producing all Baojun models. SGMW currently has two Baojun-brand models in production – the Baojun 630, and the Le Chi mini car – which in future will be built at the new Liudong plant. IHS Automotive forecasts show that two more models will also be added to the Baojun line-up over the next few years, including an SUV and a B-segment sedan car. The models will bring total Baojun brand sales to around 200,000 units in 2015, according to our current analysis.
China is now JLR's largest global market (see China: 5 November 2012: China becomes largest market for Jaguar Land Rover). JLR delivered 60,000 vehicles in the first 10 months of the year, which represented an almost 90% year-on-year increase. The popular Evoque SUV has sold nearly 20,000 units this year in China alone. Southern China accounts for 14% of JLR's Chinese sales, and an expanding dealership base is expected to grow this further.. The company has signed up nearly 30 dealers in southern China. Half of these are now operational, with the rest to follow over the next six months. JLR is expected to begin production with the popular Range Rover Evoque SUV, followed by the Freelander (see China: 21 September 2012: NDRC approves Chery–JLR JV to build Freelander and Evoque). By 2015, once production has begun in China, IHS Automotive forecasts show that JLR will see sales rise to around 100,000 units in China.