Automotive industry experts have said Jaguar Land Rover’s plans to assemble cars in China are vital to establish the company as a global player.
The Midlands-based car-maker has unveiled plans to manufacture in the Far East for the first time, after seeing demand for both of its marques soar in China last year.
And while the proposals come as JLR plans to close one of its two Midland plants – an intention reaffirmed by the company last week – experts believe they are important for the ongoing strength of the firm.
Chief executive Carl-Peter Forster revealed the China plans during a busy period for the company in which it announced 1,000 more UK jobs, agreed to sell its Browns Lane veneer plant, returned to profit and warned it could move its research and development base overseas if industry tax breaks were slashed.
Professor David Bailey, of Coventry University Business School, said JLR’s plans to assemble in China would not impact on UK production.
Prof Bailey, who writes an exclusive blog for the Birmingham Post, said: “This isn’t at all surprising. There has been a huge growth in sales in that area, particularly for Land Rover.
“Most manufacturers will produce near their end market for exchange rate reasons – the likes of Mercedes and BMW already do this.
“I don’t see it as a threat as long as they are expanding. What is critical is that they invest and bring in a new range of models.”
Dave Leggett, managing editor of industry website just-auto.com, agreed that JLR would have to focus on China in order to establish itself as a major global player.
He said: “This is a natural progression which makes absolute sense.
“Obviously it is a big growth market for Jaguar Land Rover in the future and they are obviously thinking they have to expand their volume there in the medium term.
“I don’t see it as a threat to production in the UK. I would imagine it would be quite a low level of local content in China to begin with, eventually ending in the assembly from kits to avoid import tariffs.”
Rising sales in China played a part in helping JLR bounce back into profit. It revealed last week it had made £32 million profit before tax, compared to a £280 million loss in the previous 10 months.
The forecast-beating performance from Indian owner Tata Motors – which bought JLR from Ford for £1.7 billion in 2008 – came after sales of Jaguars increased 38 per cent in China and sales of Land Rovers jumped 55 per cent.
The improved fortunes had led to one national newspaper reporting that Tata was planning a U-turn on proposals to close either its plant in Castle Bromwich or Solihull, but the company has been quick to quash such speculation.
Prof Bailey said he had major doubts over any increase in sales leading to both Midland plants remaining open.
He said: “Even if Jaguar Land Rover ramp up production from 200,000 to 300,000, as they plan to do, they would still only need two plants in the UK.
“I see quite a rapid expansion for JLR but they still have too many plants in the UK. I can’t see anything happening to change that.”
Prof Bailey also gave his backing to the company over a reported threat to pull its research and development base out of the UK.
JLR spends £400 million a year on R&D – more than any other car-maker in the UK.
The company, which has announced 1,000 jobs would be created to work on a new compact Range Rover model at its Halewood plant in Liverpool, employs 3,500 engineers, mostly at Gaydon.
Mr Forster said he planned to “engage with the Government to tell them that the UK should not be left out of these new technologies,” and Prof Bailey said he was taking an opportunity to point out JLR’s crucial role in the country’s engineering offer ahead of the emergency Budget on June 22.
He said: “What was interesting about Carl-Peter Forster’s statement was that it showed he expects Government support.
“What the Conservative party said in the run up to the election is that they want to focus tax credits on smaller companies.
“I think Jaguar Land Rover are just saying ‘we spend a huge amount on research and development, so don’t cut us off’. It was a pre-emptive move on their part, and quite right too.”