JLR has been having a pretty good time of it recently, with 2012 sales up 30% to 357,773 vehicles worldwide. China is the firm’s largest market (over 71,000 sales last year) followed by the UK, and although India is much smaller by comparison, the commercial logic for making cars there is pretty straightforward. JLR is owned by Tata, one of India’s largest car manufacturers, so production facilities are readily available. And the duties on locally produced vehicles are much lower than those on imports, so the move will enable the XF’s hefty price tag to be cut substantially, which should boost demand.
Fears have been expressed however that the move away from all-UK manufacturing is the thin end of the wedge, and that further shifts to local production in foreign markets could hurt job prospects in the company’s West Midlands heartland. JLR denies that there will be any such impact.
Strictly speaking, the cars will be ‘assembled’ rather than made at Pune, using a technique known in the industry as CKD – Completely Knocked Down. In other words, they are assembled from kits of parts shipped out from the UK, so any additional sales should benefit existing parts suppliers. The technique has been used by Jaguar before – back in the seventies it assembled cars this way in Australia, New Zealand and South Africa.
Not only does CKD circumvent import taxes, it also reduces shipping costs – all without the need for hugely expensive and time consuming tooling up, or the need for a reliable local parts supply chain.
So good news on the face of it. But in the longer term, here at MT we would be surprised if JLR isn’t considering full-blown manufacturing capacity somewhere a long way further east than West Bromwich. So many of their cars are sold in China and Asia these days, it has to make sense…