Chinese cars could be built in UK by Nissan and JLR – but there are risks

Chinese car makers could be on the verge of manufacturing in the UK in deals with JLR and Nissan to use their facilities. But local industry association the Society of Motor Manufacturers and Traders (SMMT) has cautioned that any production must be fully integrated using local suppliers, something the Chinese might find hard to achieve. Omoda and Jaecoo parent company Chery is reportedly looking to use spare capacity in JLR’s plants to build models locally, while Nissan is rumoured to be reorganising a line at its Sunderland facility to build the Nissan-Dongfeng N7 electric saloon. JLR declined to comment while Nissan’s head of Europe Max Messina has previously said he will be “very pragmatic” in his efforts to fill Sunderland in response to the Dongfeng question, without clarifying. The UK became a key market for Chinese brands last year after they doubled their share last year to 9.5%, led by MG, BYD and Chery. In December that share hit 18%. Traditionally, car companies prefer to build locally when volumes hit a certain level. After selling over 200,000 cars in the UK last year and just over 800,000 across Europe as whole, the big Chinese brands have certainly reached that threshold. With the UK targeting 1.3 million vehicle production by 2035, up from a 73-year-low of 764,715 last year, the Chinese have been target number one in the country’s effort to attract a new player. “When you’re talking about new entrants there’s really only one game in town,” Mike Hawes, SMMT CEO, told Autocar at a recent briefing. The ultimate goal for the government is to persuade a Chinese brand to build a brand new facility in the UK, but assembling cars in existing facilities could be a good stop-gap. “Using spare capacity at British plants appears less radical than it might once have done,” David Bailey, professor of business economics at the Birmingham Business School, wrote in a blog post. “Such moves reflect a pragmatic attempt to manage risk, improve asset use, and sustain industrial capability during a period of structural change.” Chery and JLR already have a relationship thanks to their joint venture in China, as do Dongfeng and Nissan. In doing so, Dongfeng and Chery could avoid tariffs as well winning favour with buyers wary of Chinese vehicles. “Local assembly in the UK using established facilities offers a faster and less risky route to market than building a greenfield plant or relying solely on imports,” Bailey said. “It could also be politically popular”. But the difficult question for the UK government as they try to woo Chinese investment is how integrated any contract manufacturing arrangement should be. Aside from Geely’s operations in Sweden with Volvo and its black-cab facility in Coventry, Chinese assembly so far in Europe involves little more than finishing off cars sent over from kits. This is not the SMMT’s idea of manufacturing. “You'd want any investment to be full production, not just assembly of CKDs [kits],” Hawes said. “You'd want them to use the UK supply chain where possible” Chery’s current European assembly operations in Nissan’s old plant in Barcelona for the Spanish market is strictly a screwdriver operation involving fitting suspension, axles, wheels and drivetrain to Tiggo SUVs that are otherwise imported and fully assembled. MG under current owners SAIC did the same thing at Longbridge in Birmingham with the MG6. The European Commissioner for Strategy Stéphane Séjourné specifically called out the Chery facility last September, saying the screwdriver process “creates low-quality workplaces and does not add any value to the European industry”. The advantage of moving to full production in the UK however is less clear in terms of cost. China’s local supply chain is highly efficient and many car companies are more vertically integrated than European counterparts. Without moving suppliers, Chinese companies would find it hard to tap into an the existing supply chain without escalating costs that would be already elevated thanks to higher wages and energy bills. Then there’s the brand risk. Nissan is less exposed given the Nissan N7 is already an existing car in China produced in a Dongfeng-Nissan facility that has been well received locally. But Chery and JLR are further apart. The two are collaborating on the new Freelander together for launch this year, however local production for the UK would mostly likely be centred on existing models, raising the spectre of the Jaecoo 7 ‘Temu Range Rover’ (as it is affectionally known on social media) being built alongside the real thing. But these are minor concerns. These early efforts to bring the Chinese on board recall similar moves with the Japanese in the 1970s and ‘80s, specifically with Honda working with British Leyland on the Triumph Acclaim (aka the Honda Ballarde) and later Rover models before building a plant here, along with Nissan and Toyota. Back then the Japanese had higher barriers to entry, including a ‘gentleman’s agreement’ to limit imports to 11% of the UK total sales. Now the UK is pretty open to the Chinese, with only the 10% World Trade Organisation specified tariff and no additional EV tariffs. That both favours the UK and acts as a disincentive to produce here.

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Chinese cars could be built in UK by Nissan and JLR – but there are risks

Makers Chery and Dongfeng eye spare capacity at some of UK's biggest production sites

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Chinese cars could be built in UK by Nissan and JLR – but there are risks

Makers Chery and Dongfeng eye spare capacity at some of UK's biggest production sites

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