Jaguar Land Rover (JLR) has opened a new production base in Changshu in eastern Jiangsu Province as it aims to cement its presence in China's premium car market.
IHS Automotive perspective | |
Significance | JLR will begin with production of the Evoque sport utility vehicle (SUV), which is already the automaker's most popular model in China. |
Implications | The Land Rover brand is forecast to be the fourth-largest premium player in China in 2015 following market leaders Audi, BMW, and Mercedes, according to IHS Automotive forecasts. |
Outlook | With local production in China, its largest global market, as well as an existing production base in the United Kingdom, the automaker is said to be considering developing a stronger footing in the US market, with talk of a production base there. |
Iconic British carmaker JLR, which is owned by India's Tata Group, has opened its first production base in China with joint-venture (JV) partner Chery Automobile. The new plant is part of a CNY10.9-billion (USD1.78-billion) investment for the automaker to develop a strong foothold in China. The plant will have initial capacity to produce 130,000 units per year (upa), with the first model being the Range Rover Evoque SUV. JLR is also building a body shop at the Changshu base, so that it can produce Jaguar products in China in the future. "The demand that's here in China will far outstrip [Changshu's] capacity, so we have absolutely zero plans to export any cars whatsoever," Bob Grace, JLR's China head, said at this year's Beijing Motor Show, as reported by the Financial Times.
The JLR-Chery JV began construction of the plant, located in Changshu in Jiangsu Province, in late 2012 with a total investment of CNY10.98 billion (see China: 19 November 2012: JLR-Chery begins CNY10.9-bil. plant construction). In addition, construction of a new engine plant for production of fuel-efficient engines is also included in the JV partnership agreement. JLR is currently developing a new engine production base in Wolverhampton (United Kingdom), which will begin production in 2015. The new GBP500-million (USD839-million) plant will give JLR the necessary back-up to transfer engine production technology to its new base in China (see China: 12 June 2014: JLR plans to build engines in China).
Meanwhile, JLR is reportedly considering building a US factory in the coming years, according to the Financial Express. The company told Automotive News Europe that it "is looking at how it can expand its footprint globally and there are various options on the table". Reports indicate the company is in talks with southern US states and could eventually produce 200,000 upa at the new plant. North American production could help the company to avoid tariffs and smooth out exchange-rate fluctuations. JLR is also planning a new plant in Brazil for 2016, as well as considering production in Mexico.
Outlook and implications
China became the largest market for JLR in 2013, accounting for sales of around 95,000 units during the year, with the UK and US following with 77,500 and 67,000 units respectively. In 2010, the two brands Jaguar and Land Rover saw combined sales in the country of 26,542 units; in 2015, IHS Automotive forecasts the combined sales of the two brands will rise to 140,000 units, with further growth anticipated with sales reaching the 250,000-upa mark in 2020 in China.
In 2010, the top model was the Land Rover Freelander, which saw annual sales of around 10,720 units. From 2012, it was outpaced by the Range Rover Evoque with annual sales of 20,665 units. This model will further propel sales of the Land Rover brand, with 42,000 upa forecast for 2015 in China. The first model that JLR will produce in China is the Evoque, simply because it has been the bestselling model for the JLR group since it was introduced as an import to the country. With local production, volume sales of the Evoque are expected to significantly increase. In its first full year of local production, we forecast that the Evoque will see production levels of around 32,000 units.
In 2013, JLR saw total sales in China of 95,237 units, which our historical data show increasing by 32% from the 71,940 units sold in 2012. Of this, the Evoque contributed sales of 27,148 units in 2013, up from 20,665. In 2010, the premium market in China saw annual sales of 697,933 units; in 2015, this is forecast to rise to 2.07 million units.
With local production in China, the volume sales of Land Rover and the brand's market share in the premium segment will see significant gains, rising from 3.42% in 2010 to 5.64% of the premium segment in 2015 in China. The Land Rover brand is forecast in 2015 to be the fourth-largest premium player following market leaders Audi, BMW, and Mercedes.
In terms of JLR's potential plans to develop a base in the US, so far reports do not indicate which vehicles might be built there or when the facility might come online, although the upcoming Jaguar SUV might be selected for NAFTA production to reduce the costs of importing the vehicle. The JLR brands have seen increasing sales, including a jump of more than 7% in retail sales in September 2014 (see World: 14 October 2014: JLR's retail sales rise more than 7% y/y during September). The company is due to introduce a new design look in 2017, along with the upcoming Jaguar SUV (see United Kingdom: 8 October 2014: JLR signs component deal with ZF Lemforder; Jaguar to launch new look by 2017). While expanding production, the company is expected to leave the bulk of production for these traditional English brands within the UK, including a forecasted increase of Jaguar production from 78,566 units in 2013 to more than 200,000 units in 2018 (see China: 6 October 2014: Chery-JLR JV to begin operations at new Chinese plant this month – report). Total JLR production is forecast to reach more than 750,000 upa in 2019, not including the potential US facility.