Jaguar & Land Rover Build Newest Factory in Shanghai

Posted: October 27, 2014 in Econ 101, Free Trade, Technology and Energy

SOURCE: http://www.ft.com/cms/s/0/d192e344-5925-11e4-a722-00144feab7de.html

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Jaguar Land Rover prepares for China push with Shanghai factory

October 21, 2014

BEIJING, CHINA - APRIL 23: A Range Rover Evoque car is displayed during the media day of the 2012 Beijing International Automotive Exhibition at beijng International Exhibition Center on April 23, 2012 in Beijing, China. Auto China is China's leading auto show and many of the world's carmakers are in attendance despite lagging sales in the country. (Photo by Lintao Zhang/Getty Images)

Jaguar Land Rover is attempting to gain traction in China with its flagship saloons as it seeks to break the stranglehold of its dominant German rivals in the world’s largest car market.

The British carmaker – which on Tuesday opened its first fully fledged manufacturing facility outside the UK in Changshu, near Shanghai – plans to manufacture its premium Jaguar models in China, as it seeks to face off with Audi, BMW and Daimler’s Mercedes-Benz marque.

JLR sold more than 90,000 cars in China last year, but only 16,000 of these were Jaguars. Its far more popular Range Rovers and Land Rovers command 10 per cent of the market for luxury SUVs.

“The biggest issue that we have with the Jaguar is that we are competing against brands produced in China,” said Bob Grace, head of JLR’s China operations.

JLR is betting that the Changshu factory, with an annual production capacity of 130,000 vehicles, can help it catch up with its German rivals, who have extensive manufacturing operations in China.

Imported cars are subject to 25 per cent tariffs and high shipping costs, making them more expensive than locally produced models. Local production facilities also enable carmakers to produce vehicles tailor-made for the Chinese market.

JLR, a unit of India’s Tata Motors, will initially produce Range Rover Evoques, one of its less expensive SUV models, with its Chinese partner, state-owned Chery Automobile.

But from 2016, the Coventry-based carmaker plans to begin production of two more vehicles, including a Jaguar sedan, said Ralf Speth, JLR chief executive. The other vehicle is expected to be the Land Rover Discovery Sport. JLR declined to comment further on its plans for the additional models.

The three German brands collectively sold more than 1m vehicles in China last year, accounting for about 80 per cent of premium sedan sales.

Stephen Reitman, an analyst at Société Générale, said Jaguar sedans had to sell well in China if it was to be seen as a truly global brand. “If you don’t crack that market, your ambitions are always going to be limited,” he said.

“Every time Jaguar launches a product, they are measured against BMW, Audi and Mercedes, who have much greater reach [and] much greater scale.”

Mr Speth said the JLR’s UK factories in Liverpool and Birmingham would not lose any business to the China plant.

“There is an absolute commitment to the UK,” he said, noting that JLR would open a new UK engine plant this month. “We [will] stay and be seen as a British company with British engineering and British design.”

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