ANSWER 1

The Chinese luxury car market was flooded with foreign brands due to the attracting business
opportunities in the industry. There was a very tough competition among the foreign players:
1. German car manufacturing companies like Audi, BMW and Mercedes has almost a 70 %
share of the luxury car market in China. Because of their excellence in quality and deep
pockets.
2. The Chinese market being a so opportunistic, attracted every company in the industry to
make special efforts to win the Chinese markets. The Italian company, Lamborghini
launches their luxury SUV with a bundle of special design features about the Chinese
culture.
3. Nissan Motor Co. had also shifted part of their production in China. And were
developing high-end infinity vehicles which were new for the industry. They were
projected to roll out 100,000 infinity vehicles by 2016.
4. Toyota Motor Corp. introduced latest models of Lexus, specially customized according
to Chinese preferences.
5. BMW was no far behind. They had set up their second assembly unit in China in a
partnership with Brilliance China Auto motive.
6. The American giant General Motors (GM) enjoyed a 3% market share in the year 2011.
They sold 28000 models of Cadillacs that year.
7. By the year 2011, the growth of the luxury car segment had touched 7.3% and was
estimated to reach 12% in the upcoming years.
8. The Chinese youth market segment was covered by companies like Wrangler and The
Grand Cherokee who manufactured premium luxury sports vehicles, identifies as a
symbol of wealth and class.
9. Mercedes Benz was performing so well in the Chinese industry that they achieved a
growth 112% YOY in 2010.
10. Ferrari’s growth was also exceptionally remarkable at 50% YOY in 2010. They introduced
their iconic 12-cylinder F12 Berlinetta in the Chinese market.
11. The overwhelming growth rates attracted some of the other small companies like
Cherry, BYD and Geely to improve their product quality and enter the export markets.
12. German legend Audi enjoyed a clear 30% market share which was the highest in the
industry.
13. BMW and Mercedes each shared about 20% of the luxury car market in China.
14. The presence of German giants had made the market so stiff that existence of domestic
players was being threatened, thus the new entrants were feeling very risky.
15. The intense competition made the luxury car manufacturers offer discounts on their
model which rarely happened in the industry. The foreign companies faced huge loss of
margins because of the same.
ANSWER 2

The potential of JLR with Chery Automobiles in garnering a significant share in the luxury car
markets is explained in the following points:

1. China had been a very successful market in the luxury car market around the globe, with
exceptional results in growth. Every global automaker saw China as a potentially high
performing industry and wanted to invest in.
2. JLR is an international car manufacturer with deep pockets and well performing in the
business. They have a very effective and efficient production capability and produces
high quality luxury vehicles. Cheery has local presence in China and due to the Chinese
policies, gives an advantage to JLR of tying up with a local manufacturer.
3. The Chinese government was emphasizing on the development of their domestic auto
industry, which was beneficial for JLR as they were merging with a domestic company.
4. JLR’s saloons and SUV’s were high in demand in the Chinese luxury market around 2010.
This created a sense of assurance for the joint venture to be successful in business.
5. JLR’s presence in China was effective as the Chinese market was the third largest for the
company as from six car they produced, one was exported to China.
6. The Chinese market had such an inviting gap to fill, because of the vast land resources
and the population of 1.3 billion people. This made sure that the market always had
demand for vehicles.
7. There was an average growth of 17.4% in the Chinese automotive industry from 2006 to
2010, which was a very promising growth for the industry post-recession period.
8. The joint venture was projected to be highly profitable as the two companies would
share their experience and knowledge in technology, R&D, market trends and
production operations.
9. By the year 2011, the growth of the luxury car segment had touched 7.3% and was
estimated to reach 12% in the upcoming years.
10. Jaguar Land Rover had almost a double figure in sales in China as compared to UK, their
home country.
11. The yearly assembling limit was at first begun at 130,000 units however it was relied
upon to arrive at the objective of 250,000 constantly 2020.
12. Production of 34000 Range Rover Evoques, 43000 Range Rover Free-landers and 23000
Jaguar vehicles were normal continuously 2014.
13. JLR already had a well-established distribution network in China comprising of 104 Land
Rover dealerships and 97 Jaguar dealerships which provided an effective supply chain
for the production unit of the joint venture.
14. The company had set up its purchasing offices in the market to enable sourcing raw
materials to reduce production costs with the Indian and Chinese low-cost bases.
15. The manufacturing capacity in the initial years of the merger was set to be 130,000 units
and was expected to touch 250,000 in 10 years.
ANSWER 3

1. Global recession had created an economic crisis around the globe due to which the
European and American industries were performing low. Whereas the Chinese luxury
car market has shown a good growth rate in the recent years and was expected to take
over the American industry by 2015. Thus the joint venture is a good deal for JLR to
enter the Chinese market.
2. China had become one of the best performing markets and therefore a major
investment opportunity. Car makers around the globe were moving towards acquiring a
market share in China. Joint ventures were becoming a common trend for international
companies to enter in the Chinese market.
3. China was rich in their land resources which provided cheap land for setting up
industries and being the most populated country in the world, provided cheaper labor
and never-ending consumer demand.
4. The Chinese government proposed liberal import policies for inviting foreign
investments which made the way easy for foreign companies such as JLR.
5. The State government of China had been instrumental in starting advancements in the
vehicle business through its new improvement layout (the Outline) for the car business
2009‐2011. It had targets of making China's car area to contend all around the world,
improvement of energy proficient and ecological well-disposed autos, and toboost the
homegrown interest for vehicles in China.
6. The urbanization of cities and the increased level of incomes fueled to domestic growth
which increased the demand of luxury vehicles.
7. On an average, only 56 people in every 1000 citizen owned cars. This gap was an inviting
opportunity for growth of the venture.
8. The government promoted a ‘Market for technology’ campaign to adopt and promote
ethical management techniques and better technologies in the industry. The
government preferred joint venture operations for the same, as they could use foreign
resources for the benefit of the industry.
9. American and European countries had been facing recession crisis with huge spike in
fuel prices. Due to which the Chinese markets became a very attractive opportunity for
car manufacturers to enter the industry.
10. The joint venture was initiated so that the two companies can utilize their combined
forces to capture the Chinese markets. Cherry has a very wide local presence in the
market and appropriate resources and in return JLR offered excellent quality of cars
with their international experience and resources.
ANSWER 4

1. German big shot companies like the BMW, Audi and Mercedes together covered about
70% of the luxury car market in China. Their presence made it tough for other foreign
players like JLR to enter the market and achieve their standard growth.
2. Concerning the presence of these German giant corporations, The Chinese government
had restricted some liberal policies which made the entry of new players more
complicated. The special preference given to automotive industry was waived off.
3. The Chinese government established new regulations which allowed the government
organizations to only buy only vehicles manufactured in China. This hinders with the
sales growth of the venture between JLP and Cherry.
4. Certain rules and restrictions were imposed on foreign companies to be able to supply
to the govt. companies. Setting up R&D units in China was made compulsory, also a 2%
of the earning should be invested in R&D along with the company establishing a new
brand name in China.
5. The govt delayed several foreign deals in order to focus on the growth of domestic
companies. This created a big problem for international companies eager to invest in
China.
6. Manufacturing locally was proving to be more costly to the joint companies as the
money saved in local sourcing was being transferred to the middle-men buyers. This
reduced the profit margins for the company. To gain more profits, the company
estimated that they had to run with 44% more production and had to completely rely on
the joint venture royalties.
7. Even after managing to score more profits, the taxation policies of China were an issue.
They were charged more in comparison to UK, which ultimately led to lower margins.
8. Dealing with the quality and safety standards according to the Chinese regulations was
very complicated, also due to the presence of other excellent players such as BMW &
Audi.
9. Even for the domestic players the market was becoming stiff due to the fierce
competition by German brands. Entry of a new venture like JLR & Cherry was very risky
at the moment.
10. Avoiding the cultural differences between the UK based and China based companies was
another major challenge for the venture, as peace and harmony within the organization
was absolutely necessary for working efficiently.