JLR eyes West Asia through Saudi JV

Written by fe Bureau | Mumbai | Updated: Dec 12 2012, 08:16am hrs
After setting up a joint venture in China, the worlds largest automotive market ahead of the US, Tata-owned British iconic brand Jaguar Land Rover (JLR) has now set its eyes on West Asia. The company on Tuesday said that it has signed a letter of intent with the National Industrial Clusters Development Program (NICDP) in the Kingdom of Saudi Arabia for an automotive partnership.

Agency reports said that JLR has signed a preliminary deal with Saudi Arabia to manufacture 50,000 Land Rover vehicles a year in the kingdom at an investment of 4.5 billion riyals (approximately Rs 6,516 crore), citing the countrys commerce and industry ministry. The manufacturing plant is expected to begin work in 2017 in either the Jubail or Yanbu industrial cities.

When contacted, a JLR spokesperson said, We have no further comment to make on this subject right now. The company release said that the details of the development options including level of investment, potential capacity and job creation are expected to be announced next year.

We are committed to further international partnerships to meet record demand for our highly sought after vehicles, said Ralf Speth, chief executive officer, JLR.

The Kingdom of Saudi Arabia is an attractive potential development option, complementing our existing advanced facilities in Britain and recent manufacturing plans to expand in other countries including India and China, Speth said.

It is the worlds largest integrated aluminum complex that goes on stream from 2014 at the Ras Al Khair facility that has attracted Tatas. Also the favourable duty structure in the region and easy access to other Middle East markets from Saudi Arabia would help JLR, said VG Ramakrishnan, Frost & Sullivans senior director (transportation & logistics), South Asia, West Asia and North Africa. There is a flat 5% duty on goods, whether you buy a car or a soap or sell it.

A joint venture between Saudi Arabian Mining Company and Alcoa of the US, the aluminum smelter will have mining, refining and production of the aluminum at one facility. It is expected to produce lowest-priced aluminum in the world. Ratan Tata, the outgoing chairman of Tata Motors, in an interview to an automobile magazine had said, This smelter could make the production of aluminum in Saudi Arabia very competitive.

Moreover, the contribution of emerging markets to JLRs overall sales has also seen a rise. For the eleven months to November 30, 2012, emerging markets contributed a 32% increase in global retail sales to 324,184 vehicles of JLR.

In the current calendar year, sales in the West Asia and North Africa have increased by more than 9% to 11,418 units.

JLR along with NICDP will undergo a detailed feasibility study to determine the viability of setting up an automotive facility. The company it has already sought opportunities in aluminum component production, which fits well with lightweight metals car project.

JLR recent formed a joint venture with Chery Automobile in China to manufacture vehicles at a new plant near Shanghai. The Chinese manufacturing plant is expected to open in 2015, taking the advantage of growing sales of JLR vehicles, which has seen a risen 80% in the past year. Moreover, JLR is also going through a separate expansion at its assembly facility in Pune, India.

This is an exciting project that could enable JLR to establish a joint venture partnership in a part of the world where luxury vehicle sales are expected to rise, said Speth.

JLR has been looking at selling more of its vehicles outside the UK and its China, India and now Saudi plan is to reach out to markets aggressively and at a competitive pricing, said an auto analyst.