Jaguar Land Rover to build engine plant in China

Jaguar Land Rover plans to build an engine factory in China, as it embarks on a strategy to internationalise its production footprint.

The engine plant, its first ever outside the UK, would be built on the same site as its car factory in China, which will start production this year. "There is an opportunity to do that [an engine factory] within the existing footprint of the factory," said Ian Harnett, JLR's director of purchasing.

JLR's huge rise in production over the past few years has been a central part of the recent renaissance of the UK's car industry, which has doubled exports in value over the past decade.

Mr Harnett declined to comment on the company's internal timeline for the plant, but said it would be after the company's British engine factory in Wolverhampton begins production.

Construction of an engine factory in China is expected to start within two years, according to two people with knowledge of the plans. UK engines will be exported to the Chinese car factory in the interim.

"We will be building more engines in the UK than we do in China, for certain," Mr Harnett told the Financial Times.

In April Bob Grace, JLR's head in China, said that the new factory in Changshu, near Shanghai, was a "white sheet of paper" that would have European levels of automation and exceed the company's Liverpool plant in terms of quality.

Owned by Tata Motors of India, JLR is a late-comer to the Chinese market, where Audi, BMW and Mercedes-Benz dominate the luxury segment with a combined market share of about 80 per cent. JLR's Changshu facility is a joint venture with state-owned Changan, one of China's best-selling domestic brands.

JLR also intends to develop a local brand for the Chinese market in line with government requirements.

Last year Mercedes opened a new engine factory in Beijing - its first outside the US. Mercedes said the plant will eventually export critical components back to Germany.

SUVs are China's hottest selling vehicles. According to the China Association of Automobile Manufacturers, January-May SUV sales soared 38 per cent year-on-year to almost 1.5m units. Annual SUV sales in China are expected to triple to 7m units by 2020.

Great Wall Motor, based in Hebei province, makes China's best-selling SUV but has struggled this year with quality issues that have delayed the launch of its latest model. As a maker of luxury SUVs, JLR is well positioned to take market share from Great Wall and other manufacturers.

Luxury vehicles account for about a quarter of sales in Beijing, Shanghai and other major regional markets and are expected to increase their market share as licence plate restrictions to combat congestion and pollution encourage existing car owners to upgrade to more expensive brands. Ford said last month that its Shanghai joint venture will invest Rmb8bn in a new factory to manufacture its luxury Cadillac marque, which it now only exports to China.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation