Today’s news that Tata Motors’ Jaguar Land Rover is to start producing vehicles in China within two years should not worry the UK workforce too much.
‘Production’, initially of Land Rovers, in this fast-growing market – and in India where LR output is expected to start next year – means local assembly of kits which will have to be produced, packed (a very labour intensive operation) and exported from the mother ship in the UK, ensuring gainful employ at the source factory, the new assembly operations and at parts suppliers both in Europe and the export markets as ‘local substitution’ of items like wheels and tyres, batteries and radiators, wiring looms, glass and upholstery is ramped up.
Rivals’ moves into India and Russia have often begun with SKD, or semi knocked-down assembly where mechanicals are mated to completed bodies and then, as local expertise grew, shifted to CKD (completely knocked-down), adding welding and paint to the overseas operation. It’s a long way even from there to full local manufacture.
And it’s not as if Land Rovers have not been assembled abroad before. Soon after the utilitarian original was launched on the late 1940s, it began to be stitched together in far-flung, tariff-protected corners of empire such as Australia, New Zealand and South Africa while the Sydney plant even made the luxury Range Rover for a while decades later. While the basic ‘Landy’ is still assembled in some emerging markets, Land Rover is today primarily a luxury brand and rivals such as BMW and Audi are already assembling in China and India.
Much of JLR’s growth has come recently from China where Jaguar sales for the year to the end of March rose 38% and Land Rover sales rose 55%. Rivals use China assembly to gain tax advantages, get added to official transportation consideration lists and adapt to local market preferences – for example, special long wheelbase models tailored to the chauffeur drive market.
New JLR CEO Forster has stressed that China, or indeed India, would “never be the centre for Jaguar Land Rover, it will remain in the UK.”
“Most of the volume growth [in these markets] will benefit the UK operations,” he said.
Jaguar Land Rover was aiming to grow sales in new markets on the back of a much broader model line-up.
So its move is simply following rivals, already established in local assembly with a local partner. The big questions now are who will JLR cooperate with in this next stage of its development? And will Jaguar follow?
What the future holds for JLR in the biggest car market in the world is anyone’s guess. Buick has been an outstanding success for General Motors in China and models are now designed with that market most firmly in mind. But the business has all been incremental – and cars for North America are still built there.