JLR signs deal to boost production in Western Europe as its UK plants run near to full capacity

Jaguar Land Rover (JLR) has signed a deal with contract manufacturer Magna Steyr, based in Graz, Austria, to build an unspecified number of vehicles, according to a Reuters report. The deal is being put in place because JLR's three British plants at Hailwood, Castle Bromwich and Solihull are close to full capacity. JLR chief executive Ralf Speth was keen to get the message across that the UK would remain the centre of the firm's operations despite the engagement of Magna Steyr. He said, "The UK remains at the center of our design, engineering and manufacturing capabilities. Partnerships such as this will complement our UK operations and engineering," He added that the deal was "another step in building our global footprint" to add to the joint-venture (JV) plant in China with Chery that opened last year and a small assembly operation in India.

Meanwhile it was also reported that JLR is planning to move the head of its Chinese operations Bob Grace back from his current post to head of the firm's European unit. Grace is highly regarded within JLR and has overseen a massive ramp up in sales until an alarming 23% contraction in sales in the first five months of 2015. According to a Bloomberg report Grace has already had his standard overseas posting term extended. In an emailed statement to the news agency, JLR said, "Jaguar Land Rover policy for overseas assignments is three years; Bob's significant contribution has resulted in his assignment being extended."

Outlook and implications

JLR needs to expand its European production operations as a result of the huge success it has experienced in the last four years with hit models like the Evoque, New Range Rover, Range Rover Sport and now the Discovery Sport. Of the 463,000 units that the company manufactured last year, 460,000 were manufactured in the UK. Production in China is currently ramping up; the Evoque and Discovery sport are manufactured there and a combined output of 33,000 units is forecast for this year, making China by far the biggest production location outside the UK. The decision to establish production in China was a result of a significant increase in sales from 27,000 units in 2010 to 127,000 units in 2014, despite what looks like a significant flattening out in sales this year in the world's biggest market. IHS Automotive forecasts that the Graz plant will build a new Jaguar crossover/SUV-style vehicle to slot into its range below the F Pace and a new high-end "E-CUV" model that will be the flagship of the company's crossover/SUV range and will be the equivalent in terms of range positioning for Jaguar as the Range Rover is for Land Rover. In overall terms, the increased capacity at Graz will be necessary to support JLR's production expansion from 463,000 units in 2014 to a forecast figure of 820,000 units by 2020. It is also thought that this E CUV will be available as a full EV and plug-in hybrid model (PHEV) model eventually. Bob Grace will be charged with selling these vehicles in Europe after his move back from China. With the sales of the group more than quadrupling in a five-year period between 2010 and 2014 he has done an excellent job, but a five-year stint is a long time in China for any foreign executive and the company will look to someone else to lead its growth and development through the next stage of the Chinese market's evolution.

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