China helps drive growth of UK car industry

Investments not only rescue many of Coventry's famous brands but also inject new vigor

Coventry holds a special status in the country's automotive industry.

The British motor industry was born there and many famous names in car-making - Jaguar, Rover, Triumph, Healey, Riley and more - are all from Coventry; but the city lost its manufacturing sheen over the years.

While the area is still at the heart of the country's motor industry, government and business leaders are keen to see the sector invest heavily to ensure the country has the skills pool it needs to secure the future of the United Kingdom's automotive industry.

In recent years, more and more privately owned Chinese firm have come here to save local companies, lift up the area's economy, create new jobs and bring new vitality. But while doing that, UK companies say Chinese firms are not out to overturn the local corporate culture or strategy.

Chinese carmaker Geely paid 11 million pounds ($18.4 million; 13.9 million euros) in February last year for an 80 percent stake of Manganese Bronze Holdings Plc, parent of the London Taxi Company, after buying 20 percent in 2006.

Seven months after the acquisition, Geely restarted full production of London black cabs at London Taxi Company's old factory in Coventry.

The company now employs 211 people, slightly more than double the staffing before the buyout, of which 66 are engineering and technically orientated personnel.

Daniel Li, chairman of the London Taxi Co and chief financial officer of Geely Group, says: "We stick to our plan and we deliver what we promise."

Peter Johansen, vice-president of Geely's black cab operation, says: "We have not finalized our staff plans for next year yet, but I expect that we would employ around 250 directly or indirectly by this time next year with further increases as we begin building and ramping up our new factory."

Sales revenue has risen steadily since the acquisition by Geely and continues to improve. While sales last year were worth 33.9 million pounds, the first six months of 2014 have already amounted to 25.3 million pounds, a surge of 245 percent compared with the first six months of the previous year.

The company's Holyhead Road factory is scheduled to build 1,440 vehicles mainly to be sold in the UK. In addition to this, about 850 vehicles will be made for the overseas market to fill orders from Azerbaijan, Australia, Egypt and India.

"More than one year ago, when I visited the London Taxi Co, it was rather quiet, but this time when I toured the factory, the whole place was bustling," says Zhou Xiaoming, minister counselor for economic and commercial affairs at the Chinese embassy in London.

Also, as part of its ambitious plan to strengthen the London Taxi brand and comply with new government regulations set to take effect in 2018, the company is due to launch its TX5 model with total investment of 300 million pounds, a zero emissions-capable, range-extended, plug-in hybrid electric taxi, with an exterior like the company's current black cab.

"Geely's investment means that we have the funds and the capabilities required to further improve the eco-credentials of our existing vehicle, and this has allowed us to do what we do best, create purpose-built vehicles."

Similar acquisition and management successes are also happening at car parts makers.

Shandong Yongtai Chemical Group Co, a privately owned Chinese manufacturer from Shandong province, took over the majority ownership of Covpress, a local parts maker, in a deal worth 30 million pounds in July last year.

Covpress has enjoyed remarkable growth since then. As a direct result of a 10 million pound investment in its industrial unit and 2.6 million pounds in machinery purchases, 75 new jobs have been created at the Canley-based business unit, with revenue up 22 percent in the past 12 months.

New orders are growing. You Xiaoming, CEO of Shandong Yongtai, says it has signed a new five-year contract with a luxury sedan manufacturer and a 13-year contract with a multipurpose vehicle maker, deals valued at 230 million pounds and 384 million pounds respectively.

As business booms, the company has begun to struggle with limits in its production capacity. On the first anniversary of Covpress' acquisition by Shandong Yongtai and Telford-based TIA Treadsetters at the end of July, You announced that the company would invest a further 15 million pounds to support the firm's continued growth and stay on top of demand.

"We have exciting plans for the future. Over the next two years, specific plans are already in place to inject further investment that will modernize and expand our facility here at Covpress," You says.

"This will add much-needed capacity to our automobile and non-automobile clients and further career opportunities within the facility."

This latest investment will also increase the workforce from about 550 to more than 700 in the next two years, making it one of Coventry's largest private employers.

"The confidence that the Chinese partnership is showing in this company is plain to see, and their investment is very welcome," says Kit Halliday, joint CEO (Europe) for Covpress.

Halliday says it is clear that even though Chinese companies invest capital in UK firms, they do not intend to overturn the longstanding corporate culture or management strategy.

"The perception that Chinese investment in the UK is to overhaul the UK corporate culture and management code with a Chinese mentality is utterly false. There might be some apprehension at the start of the merger, but when business picks up, along with the creation of more job opportunities, everyone is happy," Kit adds.

Zhou says: "Chinese investment in the UK has reached a total of $30 billion, and the auto industry has become a new hot spot for Chinese investment abroad."

Private firms play an important role, he says.

"The merger between Yongtai and Covpress produced outstanding economic results within a year, demonstrating the complementary business cooperation and enormous potential between China and Britain."

Another example of Coventry companies enjoying strong growth after receiving a fresh injection of capital from new Chinese owners is Veneer Manufacturing Centre of Jaguar Land Rover.

In November 2010, Veneer Manufacturing was acquired by Lawrence Automotive Holdings Ltd, owned by Huaxiang Group of Zhejiang province, after just over a year of negotiations and due diligence. The value of the deal was not revealed.

The company has seen significant growth since the acquisition due to the launch of the new Range Rover from Coventry. In terms of staff recruitment, Lawrence Automotive worked with JLR to transfer staff back to the other JLR sites. A training program employed more than 600 new people at the factory.

Mark Beecroft, the vice-president of Lawrence Automotive, says: "The acquisition really impressed me and demonstrated China's commitment to overseas growth and expansion."

Coventry's automotive industry is continuing to accelerate, fueled by some major Chinese investments and the creation of new fuel-efficient models.

"The business communities from both China and the UK are keen to work together," Zhou says. "The partnership serves to benefit both the UK economy and the ambitious expansion abroad of China's privately owned businesses."

Contact the writers through wangmingjie@chinadaily.com.cn