Tata Motors*Ltd.’s Jaguar Land Rover opened its first plant in China on Tuesday as part of a manufacturing push there, even as it sees moderating growth in luxury-car sales in the country.
The luxury car maker said the factory will have a capacity of 130,000 cars and produce three models by 2016, including one Jaguar model, along with Chinese partner Chery Automobile Co. The first model to roll off the line will be the luxury Range Rover Evoque sport-utility vehicle, its most popular in China.
The plant is in the eastern Chinese province of Jiangsu, about 100 kilometers north of Shanghai. It is part of a 10.9 billion yuan ($1.78 billion) investment to bolster the auto maker’s brands in the world’s largest auto market. China’s premium car market totaled 1.5 million vehicles last year, nearly double its size four years ago.
By producing in China, foreign car makers can avoid paying import tariffs, source parts more cheaply and more efficiently, and benefit from lower labor costs. Currently, JLR imports its cars into China from abroad, putting it at a cost disadvantage with rivals.
“We are small in China, but our commitment to the Chinese customer is huge,” said*Ralf Speth, Jaguar Land Rover’s chief executive. “We’re trying to do the best we can to be good citizens and do the right thing.”
In the fiscal year ended March 31, Jaguar Land Rover sold more than 100,000 vehicles in China, up more than 30% from the year before, making it the company’s single largest market.
Still,*Bob Grace, regional president of JLR, said he expected moderating growth in China. He said the company expects year-on-year growth of around 20% in 2014. The market that is becoming “a little bit slower,” he said.
Consulting firm IHS Automotive forecasts 2015 JLR China sales of 140,000 vehicles, reaching 250,000 vehicles in 2020.
China’s market for high-end cars is rapidly growing and could overtake the U.S. to become the largest in the world as soon as 2016, according to consulting firm McKinsey & Co. The market is dominated by German brands Volkswagen AG’s Audi, BMW AG’s brand and Daimler AG’s Mercedes-Benz, but others including Cadillac, Volvo, Lexus, Infiniti and Lincoln are trying to elbow their way in.
China is a major part of JLR’s expansion plans. In the past the company has said it hopes to sell one million vehicles globally by the end of the decade. In 2013 it sold about 425,000 vehicles, up 19% from 2012. JLR has previously announced plans to build a manufacturing facility in Brazil and is conducting a feasibility study for another in Saudi Arabia. It also has an assembly plant in India as well as three manufacturing plants in the U.K.
