There were raised eyebrows across the auto industry when Tata bought Jaguar Land Rover from the Ford Prestige Auto Group fire sale in 2008. What did this Indian upstart, with its cheap, emerging markets hatchbacks, know of the luxury car market?

Five years on and Tata has proved to be a very good owner of JLR. The company may not have had much expertise in the sector beyond assembling some Mercedes-Benz E-classes from CKD kits, but the Tata way is to manage the brand sensibly, and let the management get on with things.

A feature of Tata’s global business expansion has been its careful husbandry of the brands it has acquired. Tata takes a good look at a brand and its management before making sweeping changes. Its takeovers of Anglo-Dutch steelmaker Corus, and British tea brand Tetley, are seen as exemplary, with high workforce approval.

And industry observers, at first fearful of an Indian company taking stewardship of classic British luxury brands, now realise that the Tata takeover was a good one. The brands simply passed from an American company in financial difficulties to an Indian one with a strong balance sheet. They’re no more or less “British” than they were under Ford – but under Tata, JLR has been able to implement new product launches and manufacturing expansions rapidly, without the need for board approval from Detroit.

And Ford left Tata with a good “dowry” – the Jaguar XF and XJ models had not yet been launched, but were fully engineered and came with the sale – as did the Range Rover Evoque. So the uncompetitive S-Type and X-Type models were swiftly dropped, and JLR now has a very young range.

Under Ford, the plan was for Jaguar to be like BMW, competing for volume luxury car sales – the X-Type was intended to compete with the BMW 3-series and Audi A4. Tata reined in those ambitions, focusing instead on Porsche as a business model in terms of volume and unit profitability.

But now, it seems Tata has changed its mind, and JLR, surfing a wave of popularity in Europe, The Middle East and, especially, China, is about to chase volume once again. New, volume models are under development as JLR looks to capitalise on a strong sales performance in 2012, where it was one of only two major automakers to post a sales rise in Europe.

GLOBAL SALES BUCKING THE TREND

In 2012, global Jaguar Land Rover sales of 357,773 vehicles were up in every major market due to new model introductions and update programmes. China is now JLR’s largest market delivering its best ever sales performance in 2012 (71,940, up 71%). It is followed by the UK (68,333, up 19%), the US (55,675, up 11%), Russia (20,549, up 43%) and Germany (16,722 up 41%).

Land Rover brand was the main growth driver, with 2012 sales up 36%. The brand's top five markets were China, UK, US, Russia and Italy – these five accounted for 65% of sales. Notable product performances were delivered by the Range Rover Evoque with 108,598 vehicles sold in its first full year of sales – more than any other previous Land Rover model. Land Rover Discovery 4/LR4 sales were up 3%, and despite being in run-out mode, Range Rover Sport sales rose 4%.

Jaguar sales rose more modestly – up 6% compared to 2011, driven by the XF 2.2 Diesel and XF Sportbrake – global XF sales rose 13%. The brand's top five markets were UK, US, China, Germany and Russia, which combined equated to 71% of sales for the year.

These increases have continued into 2013, with group sales of 210,190 vehicles worldwide in the first six months of 2013, a year-on-year increase of 14%. JLR said sales were up in every major region, including Asia Pacific (26%), UK (16%), China (16%), North America (13%) and Europe (6%). Sales have been bolstered by the new Range Rover, with 22,000 sold in H1, while the new Jaguar F-Type, which went on sale toward the end of the period, sold 3,000 units.

Land Rover’s half-year sales were up 11% at 172,554 with Asia Pacific leading the way posting growth of 28%, the UK 15% and North America 10%. June sales grew more modestly by 2% to 27,165 due to the run out of the old Range Rover Sport. Jaguar’s half-year sales were bright, reaching 37,636, up 29%.

RANGE RENEWAL

JLR has added new models across the range in the past 12 months – and if a model hasn’t been replaced, it’s had a facelift. New Range-Rover was unveiled in late 2012, and all-new Range-Rover Sport has subsequently been launched. Hybrid versions of both models have recently been revealed.

Both Freelander and Discovery will receive facelifts in the near future – a revised Discovery was shown at the Frankfurt Show last month – along with a host of other JLR announcements.

The launch of the XF 2.2 Diesel, XF and XJ 3.0 litre powertrains and the introduction of various new derivatives including the XF Sportbrake have widened the Jaguar portfolio and geographic reach. New XJ and XF All Wheel Drive models have also been launched in “snowbelt” markets and have been well received internationally, particularly in the US. These are not available in right-hand-drive, however, as AWD accounts for fewer than 5% of UK luxury sales.

On top of this, the new F-Type sports model has created a considerable “halo” effect for the Jaguar range. In particular, JLR reports that around 85% of sales enquiries for the car in the US were new to the brand, and the age demographic was 10 years younger than current customers.

INVESTMENT IN NEW FACILITIES

JLR was hugely profitable last year – in the financial year to March 31, 2012, the company generated pre-tax profits of €1.76 billion on a turnover of €15.8bn.

Those profits are being ploughed back in to the business. JLR has stated it planned to invest €3.16bn (US$4.2bn) each year for the next four years on new products and production facilities. Much of this is concentrated on new facilities in the UK – a major shift from 2009, when tough market conditions led Tata to announce that it planned to close one of the UK plants. This plan was abandoned in October 2010, when unions and management agreed that all facilities in Britain would stay open until at least 2020.

Since then new investments have been announced – and upwards of 8,000 extra workers have been hired. The most significant project is a state of the art advanced engine facility at i54 South Staffordshire Business Park near Wolverhampton, which is being built at an initial investment of €415.5m and taking employment at the site up to 1,500 new jobs. Construction commenced in June 2012.

In March 2013, with construction under way, JLR announced it would double the size of the new i54 engine plant at a cost of an extra €585m, creating a further 700 jobs. JLR claimed global demand has continued to rise since the plans were first announced. The plant will include an engine-testing centre alongside the manufacturing and assembly halls.

The factory will build four-cylinder petrol and diesel engines, codenamed “Hotfire”, for Jaguars and Land Rovers and is expected to start engine production in 2014. The Hotfire engines will not just be for the new smaller Jaguars – they will also be fitted to the next-generation XF range, expected in 2015, and are likely to feature in Evoque too. A further €433m is being invested in a new aluminium body shop at the Solihull plant south of Birmingham for the new Range Rover as well as upgrades to paint-applications technologies, trim assembly, warehousing and a new customer handover centre.

Jaguar has continued to invest in its existing plants: Castle Bromwich and Solihull in Birmingham, and Halewood near Liverpool. In 2012 it hired extra workers at the Jaguar Castle Bromwich plant to cope with as the XF Sportbrake, re-engined XF and XJ models and the new F-Type sports car. JLR also took on 1,000 workers in 2012 at its Halewood plant near Liverpool, which makes Land Rover Freelander and Evoque models.

Halewood moved to 24-hour production on three shifts, including a new night shift, last year. This is the first time Halewood, built as a Ford plant in 1964 and refurbished by Ford to build the Jaguar X-Type in 2001, has ever run a night shift.

GROWTH DRIVER – SMALL NEW JAGUARS

So with a full-year sales total of 400,000 units in sight, JLR is at a crossroads. Company sources now say JLR is planning to increase the number of vehicles made annually to 600,000 by 2020 – which will necessitate a return to building smaller Jaguar vehicles. The new cars will include a compact Jaguar saloon and estate, plus a crossover SUV, expected to be produced from 2015 – when new four-cylinder engines will also be available.

The new vehicles will be based on an all-new platform architecture, the first fully designed by JLR under the ownership of Tata Motors. They will be made from aluminium and will be built on production lines under construction at JLR’s UK Solihull plant, previously used solely to manufacture Land Rover models, creating around 1,500 new jobs, according to company sources.

The luxury compact and SUV segments are among the fastest-growing in the world, and will give JLR more firepower in the key Chinese market, where its best sellers are the smaller Land Rover models, the Evoque and Freelander. The new Jaguar saloon and estate will compete with Mercedes-Benz C-Class, BMW 3 Series and Audi A4, while the compact crossover, which is rumoured to be badged XQ, will be up against the likes of Audi Q3 and BMW X3, with prices starting just above €34,000.

Perhaps the clearest sign that Jaguar is being focused was the news last December that JLR had suspended plans for production of the Jaguar C-X75 hybrid supercar. The decision was described as a result of “thorough re-assessment of near-term market conditions”, claiming the economic landscape did not “currently” support the introduction of a supercar such as the C-X75. But launching such a vehicle would send out a mixed message at a time when appeal of the Jaguar brand is being broadened.

The C-X75 concept featured hybrid technologies, carbon composite materials developed in association with Williams Advanced Engineering. Five prototypes were built and these are being used for an R&D programme – elements of the project will be used in other future products, said JLR.

‘Project C-X75 has already broken many new barriers in terms of innovation and advanced technologies,’ said Jaguar brand director Adrian Hallmark. ‘We have achieved an incredible amount and will continue to test and develop these technologies, which are highly relevant to JLR's sustainable future.’              

CHINA

With China becoming JLR’s number one market in terms of sales, building cars there is a logical next step. Last October, the Chinese Government officially approved a plan to build a new China factory as a €1.52bn joint venture with ambitious Chinese automaker Chery Automobile. The 50:50 Chery-JLR venture will be based in Changshu city, near Shanghai, with an annual capacity of 130,000 cars. The factory is scheduled to open in July 2014. The partners will make Land Rover Freelander SUVs initially, with about a third of the installed production capacity (approximately 43,000 units) allocated to the compact SUV. This would be followed by Evoque (34,000 a year), along with some 30,000 Jaguars and 23,000 local-brand units.

According to the plan, the joint venture would comprise a vehicle plant, an engine plant and an R&D centre. The engine plant would make 125,000 TGDI and 5,000 V6 engines a year. Smaller 1.6-litre diesels may be added later as capacity rises. The joint venture’s long-term intention is to increase annual vehicle sales and production to 250,000 units.

The JV would also be able to tap into Chery’s large sales channels in China’s small and medium cities. JLR CEO Ralf Speth said the joint venture would create ‘a thrilling outlook for both Chery and JLR’. JLR already has 125 dealers in China.

INDIA

JLR already assembles the Freelander at a Tata plant in Pune, and last year launched a feasibility study into manufacturing more vehicles in India. The Economic Times of India reported that the company was considering a plan to build the next-generation Defender in India, either at Pune or Sanand. The factory is also likely to house an engine plant.

The newspaper said the feasibility study is expected to be completed in the second half of this year and if the plan goes ahead, the new plant is likely to be ready by the middle of 2015. Capacity is likely to be around 30,000 to 40,000 units a year, and JLR is keen to use this as an export hub with up to 80% of output shipped to overseas markets.

India could become the global production hub for Defender – which would free up more capacity at Solihull in the UK for Range-Rover and other Land Rover models such as Discovery.

SAUDI ARABIA

The Middle East is a traditionally strong market for JLR, and the company has announced it is looking to build vehicles in Saudi Arabia using locally sourced aluminium components. Middle East and North Africa JLR sales rose 9% last year to more than 12,000 units.

JLR last year signed a letter of intent with the kingdom's National Industrial Clusters Development Programme (NICDP) and a feasibility study is now under way to decide if full vehicle manufacture there is viable. This is likely to start with CKD assembly using kits shipped from the UK, with more complex manufacture to follow.

Speth said: ‘We are committed to further international partnerships to meet record demand for our highly sought after vehicles. 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.’

He added: ‘This is an exciting project that could enable Jaguar Land Rover to establish a JV partnership in a part of the world where luxury vehicle sales are expected to rise. If we proceed, it will complement our existing expansion in the UK and elsewhere.’

The world’s largest integrated aluminium complex, a joint venture between Saudi Arabian Mining Company and Alcoa, is due to begin production in 2014 in Ras Al Khair creating potential opportunities for the automotive sector. Jaguar is planning to source aluminium from this facility for its other worldwide plants as well.

JLR has also opened a new engineering test centre in Dubai, UAE, to conduct extreme hot-weather vehicle research, development and testing. The new facility in the Al Barsha area of Dubai will offer a comprehensive range of tests including durability, calibration and hot weather testing for heat and humidity. The facility will also test powertrains, chassis and heat and ventilation systems, as well as off-road and sand driving capability.

MALAYSIA

Land Rover (Malaysia) is considering building some models from CKD kits for sale both domestically and for export to neighbouring countries as demand across the ASEAN region continues to grow. Malaysia’s Sime Darby Group – a big regional player in importing, assembly and distribution could assemble some models for sale across ASEAN. The company said it sold 650 Land Rovers in Malaysia last year and expects sales to reach 1,000 units in 2013, most of which will be Range Rover Evoque models.

BRAZIL

JLR had been planning to set up a CKD assembly plant in Brazil to assemble Land Rover Freelander SUVs from in order to avoid high import taxes. But late last year, JLR announced it had shelved these plans following a change in local tax rules for foreign companies.

Ralf Speth said the investment no longer made sense after a court decision that regional governments in the South American country could not use tax breaks to attract foreign investors, which meant the cost difference between importing vehicles and producing them locally had disappeared. Speth added he hoped Brazilian authorities might introduce a new scheme in the future, in which case he would look at potential investment there again.

PROBLEMS AT TATA

The only black spot on Tata’s automotive business is, somewhat surprisingly, its own brand in India.

Tata’s share of India’s car market has tumbled to 8.9% in the first four months of the Indian fiscal year (April-July 2013), down from 11.8% in the year ended March 31. Factory utilisation has plummeted to just 36.2% in the first quarter of the new financial year, the FT reported. In particular, Tata’s tiny Nano city budget car has been beset with problems – a dispute over a plant location, plus unexplained instances of the cars bursting into flames.

Without a €175m dividend from JLR, Tata’s Indian business would have made a €48m loss in the first quarter of the 2013-14 fiscal year. Tata has launched no new cars since 2010 and has lost market share to importers such as Ford and Renault, largely due to SUV sales – Tata lacks an SUV model. A revised Nano has just gone on sale, but the model has never reached anything like its targets.