12 August 2015

JLR Expansion Overseas

The new Jaguar XE is hitting showrooms around the world. There
is an eye catching TV commercial in New Zealand for the car

Unlike other car makers, all of JLR production has been in the UK. Many people who buy Jags and Landies like that idea, and it will always be where many are built and where R&D takes place. That all adds huge value to the UK, something it needs with such a massive trade deficit. So why should JLR place it's future expansion overseas? There are good reasons I can think of.

The benefits of plants elsewhere are twofold, to gain access to markets where local manufacturing avoids high import duties and lower wages or costs. So let's look at the first one.

JLR have built a plant in China in a joint venture with Chery as imported cars face large import duties. I hear things around the Internet suggesting the joint venture has issues but...they had to do it. Likewise the plant in Brazil - which is much smaller - will help with tariffs in that region. There should be lower costs with these plants too. Assembly in India is also part of what JLR is now involved with and it would be good to see the old Defender made there sometime soon.

The Discovery Sport another new offering from JLR 

A deal has been signed to build vehicles in Austria, not a low wage country but may have advantages such as existing capacity that can be exploited quickly. The speed of JLR expansion may be facilitated more easily with an arrangement such as this. I am unsure which model(s) the Magna Steyr plant will build.

For the second point, it looks like Slovakia will be the next plant, with low wages the gain. If JLR wants to go smaller in size, building such vehicles will require lower salary costs. Also as Europe would be a major region for any such diminutive vehicles they are planning, it makes sense to make them there too. Capacity is to be in the 300,000 unit range. Other car makers spread wage cost variances already and JLR have to do likewise.

I would like to see all JLR cars built in the UK. However, JLR is on the move and it has to think how it can achieve this growth effectively and sustainably. JLR is moving from a small player to a mid-sized one and it's factories will be in more countries. That's what global car makers do because it is advantageous. Having all your eggs in one basket isn't smart either so JLR needs more overseas production.

The yet to be released Jaguar F-Pace being put through its paces

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