Chery, Jaguar Land Rover JV gets official approval

Chinese automaker Chery and Jaguar Land Rover's 12 billion yuan ($1.9 billion) joint venture has gained approval from the National Development and Reform Commission, China.com.cn reported.

Although no announcement has been published on the NDRC's website, insiders from Chery Automobile confirmed the approval, the Economic Observer also reported.

It only took four months for the companies to get the NDRC approval, the fastest approval for an automobile JV in five years, according to the Beijing Morning Post.

Officials from China's Ministry of Industry and Information Technology said previously that no new automobile JVs are expected to be approved in the future, which means that Chery's and JLR tie-up might be the last.

Analysts said that a detailed cooperation plan between the two companies won the government's trust.

The companies will invest 12 billion yuan to build a plant in the city of Changshu, 100 kilometers away from Shanghai. The plant — which is expected to be completed by July 2014 — will produce 130,000 vehicles a year.

About 60 percent of the capacity will be used to make Land Rover SUVs, indicating substantial profit potential considering the consecutive monthly double-digit growth of China's SUV market, according to China.com.cn.

JLR sold 47,000 SUVs in China from January to August, almost doubling the figure from the same time last year.

Meanwhile, Chery has been relying on government subsidies to get by due to poor car sales. In 2010, Chery's net loss was at 614 million yuan.

As one of the oldest domestic auto brands, Chery is said to have made many mistakes in terms of marketing, sales channel establishment, and product design. But now the joint venture with JLR has given it confidence to reconsider going public.

In July, the JV launched a large-scale recruitment campaign for departments including manufacturing, procurement, sales, finance, product development and human resources.

The director and associate director of each department are expected to come from both companies, in order to achieve a balance, China.com.cn reported.