British automotive company Jaguar Land Rover has reached an agreement with several Chinese banks for a 5 billion yuan or $704.5 million three-year revolving loan. The company announced that it plans to use the money to fund its expansion strategy in China, one of its largest markets.
The massive deal is Jaguar Land Rover's first debt financing in China since it established operations in the country in 2010. The banks that had signed the deal with the automaker were the Bank of China, the Bank of Communications, China Construction Bank, and the Shanghai Pudong Development Bank.
Jaguar Land Rover's vice-president and chief financial officer of its China operations, Arthur Yu, mentioned that part of the funds will be used to shore up the company's finances for it to better-managed cash flows during its recovery process. Much like other automakers, Jaguar Land Rover barely made any revenues during the earlier parts of the year following the months of continued economic shutdowns due to the coronavirus pandemic.
The bulk of the loan however will be used towards financing the company's goal of making China its global center for its sales, production, research, development, and procurement. Yu stated that the company has big plans for China this year and the newly acquired financing should give it the money it needs to achieve its goals.
Since it had established its presence in China, the company has drastically increased the country's share of its global sales. Jaguar Land Rover has since established partnerships with local firms, including the establishment of a joint venture with Chery Automobile in 2012. The automaker has also dramatically increased its investments in the country, establishing various research and development centers alongside its local partners.
As of this year, sales from China now account for about 50 percent of the company's global sales. Yu stated that the company aims to further increase that number in terms of the sales of its future products. He added that Jaguar Land Rover aims to work with more Chinese partners to develop new energy vehicles and autonomous driving technologies.
Before the pandemic hit, Jaguar Land Rover was reporting double-digit growth in sales for a number of consecutive months. The company is confident that it can return to pre-pandemic levels soon. Yu pointed out that car sales are slowly recovering, with the company's deliveries in April reaching the same levels as last year and May showing an uptick in overall sales. The executive did note that there are of course still uncertainties but the company is still confident in its prospects in China over the long-term.