Jaguar Land Rover (JLR) has finally confirmed that it is planning to invest in a manufacturing facility in Brazil
Jaguar Land Rover (JLR) has now finally confirmed that it is planning to invest in a manufacturing facility in Brazil. According to a statement released by the automaker, the company will be spending up to BRL750 million (USD314.7 million) by 2020 in the new site to be located in the city of Itatiaia in the State of Rio de Janeiro (Brazil). The company said it had chosen the city for its location close to the heart of the upcoming Regional Automotive Zone, and as a result of its "excellent logistics links, access to the local supplier base and skilled workforce".
Construction of the factory is set to begin in mid-2014, and it is anticipated that the first vehicles will roll off the assembly line in 2016. The new plant is intended to have the capacity to build 24,000 units per annum (upa) for the Brazilian market, and will initially employ 400 staff, a figure that will double towards the end of the decade. It is also expected to create further jobs in the local supply chain.
An agreement paving the way for construction of the plant has been signed by JLR's Global Business Expansion Director Phil Hodgkinson and State Governor of Rio de Janeiro, Sergio Cabral. However, this is subject to final approval of the plans from the Brazilian Federal Government under its Inovar-auto Programme.
Following the announcement, JLR chief executive officer (CEO) Dr Ralf Speth said, "Brazil and the surrounding regions are very important. Customers there have an increasing appetite for highly capable premium products. This new programme will enable us to bring exciting new vehicles to them, with outstanding British design and engineering, creating a world-class Jaguar Land Rover facility incorporating leading premium manufacturing technologies. We have established excellent working relationships with the State of Rio de Janeiro, the City of Itatiaia and the Rio de Janeiro State Industrial Development Company and we look forward to attracting new customers to our business in this important market."
Outlook and implications
An investment in Brazil by JLR has been two years in the making, having first been reported in November 2011, and confirms a recent report from the Brazilian government . This is the latest key emerging market that it is planning to invest in under the ownership of Tata Motors. It has already started assembly in India in order to avoid the heavy import levies on fully built vehicles shipped into the country. More recently, it signed a joint venture (JV) agreement with Chery to develop a production base in China, to give it a greater share of this market in which it is already doing well, despite relying on imported vehicles. The announcement also coincides with heavy investment in its UK manufacturing base to support further expansion through the development of new and improved products and increased capability.
This new site will help JLR further tap the Brazilian market, a country it sees as having a great deal of potential. According to the company, during the first 10 months of 2013, its sales in Brazil have increased by more than 40% y/y to 9,549 vehicles through its 35 dealers in the country, with its best sellers proving to be its Land Rover units Range Rover Evoque, Freelander and Discovery. It has been helped in its decision not only by the import tax regime, but also thanks to the increasingly strong component supplier base, particularly that being built up in the Regional Automotive Zone which will also be used by the Volkswagen (VW) Group and Renault.
IHS Automotive expects that JLR production in the country will begin in the final quarter of 2015, and grow towards the levels mooted in the automaker's statement. We also anticipate that production will centre on the Land Rover Freelander and the Range Rover Evoque, which are considered the best prospects for the market and are amongst its best sellers. There are also certain components shared by the vehicles that are likely to make local sourcing more simple. We also anticipate that the site will eventually build the DC100, the intended replacement for the utilitarian Defender, which is also expected to be a good fit for the market. While obviously Brazil, given its scale in the region, will be the key market for the output of this site, it would be no surprise if some vehicles are exported to other parts of the region as well.
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