JLR may have scrapped Saudi plans

JLR had signed a preliminary deal in 2012 to explore the possibility of building a 4.5 bn riyals plant in Saudi Arabia that would produce 50,000 Land Rovers a year

Tata Motors-owned Jaguar Land Rover (JLR) might have scrapped its plans to build an assembly facility in Saudi Arabia, even as the two brands face the toughest slowdown since their takeover.

According to a report in the Financial Times, quoting unnamed sources, Jaguar Land Rover's Saudi plan, codenamed Project Fern, is “dead and buried”.

JLR had signed a preliminary deal in 2012 to explore the possibility of building a 4.5-billion-riyal plant in Saudi Arabia that would produce 50,000 Land Rovers a year. Funds to set up the Saudi plant could now be rerouted to eastern Europe, where JLR is conducting a feasibility study in Slovakia to set up a factory having an installed capacity of up to 300,000 vehicles over the next decade.

A Jaguar Land Rover spokesperson said, "Jaguar Land Rover continues to have ambitious plans for growth globally and regularly reviews opportunities to secure further manufacturing capacity in a range of markets. Our manufacturing plans for the UK, China, Brazil and Europe are our main focus and priority at this time.”

Tata Motors intended to tap benefits of setting up the Saudi plant next to the world's largest aluminium plant in Ras Al Khair. JLR has progressively moved towards making its vehicles aluminium-based to make them light weight and fuel-efficient. "One person close to the situation said Saudi wanted to keep control of the factory and charge JLR rent and maintenance fees. There were questions over how to keep fine sand particles out of the car assembly process, and strict Saudi rules on gender segregation in the workplace clashed with JLR’s diversity policy," added the Financial Times  report.

With the China market slowing down, worldwide retail sales of Jaguar Land Rover fell 1 per cent to 272,451 units during the January-July period. The Chinese region, which contributes to nearly a fifth of JLR volumes, contracted 28 per cent during the seven months.

JLR also has an assembly plant in India where it makes the recently launched Land Rover Discovery Sport, Land Rover Freelander 2, Range Rover Evoque, Jaguar XJ and Jaguar XF.  

In China, JLR began locally producing Evoque, one of its largest selling models, from October of last year. However, changing market conditions and slower than expected ramp up in production led to falling sales.

The company was also exploring possibilities of setting up a plant in the US, which is one of the top three markets for it.

Though JLR has not commented on its US plans, a plant in North America would allow the British car maker to service the local market faster and in a cost-efficient way.

By next year-end, JLR's total global capacity is expected to reach nearly 700,000 units a year much smaller compared to the three German BMW, Audi and Mercedes-Benz all of whom have global annual capacities in excess of 1.5 million units each.