Jaguar Land Rover starts construction of new plant in Brazil
The iconic British carmaker Jaguar Land Rover, a subsidiary of Tata Motors has started working on the fully owned manufacturing facility in Brazil which is their first facility located outside of UK in Brazil. They are taking this step to be able to fulfil the increasing demand for luxury vehicles. The costs associated with the ownership of luxury vehicles are going up and to keep them in check, Land Rover are making this move so that they can increase localisation to bring down the costs. There are various cost benefits associated with domestic manufacturing and with this new facility, jaguar will be able to make good use of them.
China is also a major market for various luxury car manufacturers and that is why they will soon start selling locally built cars in China. For this they are working with a local car manufacturer there. The new plant located in Itatiaia near Rio de Janeiro which is getting setup in Brazil will have an approximate investment of $290 million. The new plant will also have an education and business centre with approximately 400 employees.
The new JLR plant will have an annual capacity of 24,000 cars which is almost 1/20th of the total JLR vehicles sold over the past one year. The new plant will help them meet demands faster and they will be offering tough competition to the German rivals. The first car to roll out of this new facility will be the Discovery Sport. At the moment, Jaguar Land Rover has production facilities in UK which is its home market and China which is a large market for their cars. There were many options for them to set up the new facility. They already have an assembly unit set up in India. Mexico was also a good option where production costs are low like India and is close to the United States. One possible reason is that despite the decline in auto sales this year and potentially weak car market in the near future, the demand for luxury vehicles hasn’t been affected. The combined sales of German luxury car makers has gone up through the month of November indicating that the luxury car sales can continue to be strong in the market.
Another good reason is that while the auto market in Brazil is on a decline now, it is expected to come out strong in 2016, approximately the time when they will be ready with their new facility. At the moment luxury cars don’t contribute much to the total car sales in Brazil. They form only 1.7 percent of the total vehicle market there which is considerably lower as compared to other markets. But as disposable incomes grow, more people will move towards luxury cars. The proportion of people with high net worth is also expected to grow in the near future giving the manufacturer a potential market. Along with the new facility, Jaguar Land Rover also plan on increasing their reach by increasing the number of dealers in the country.