Jaguar Land Rover eyes plant in Slovakia to drive global expansion

JLR reveals plans for latest factory to be in Eastern Europe as it looks to expand global presence and ease currency worries

School children wave union flags as Prince Charles' chauffeur driven Jaguar car drives past during a visit to Denbies Wine Estate on May 26, 2011 in Dorking, England
Jaguar Land Rover's British heritage is an attractive feature for foreign buyers Credit: Photo: Getty Images

Jaguar Land Rover plans to build its next factory in Slovakia as the luxury car maker looks to become a major global force in the auto industry.

Coventry-based JLR has signed a letter of intent with the government of the Slovak Republic to examine the feasibility of constructing a plant in the west of the country near the city of Nitra that would be able to turn out up to 300,000 vehicles a year.

Ralf Speth, JLR chief executive, said on Tuesday: “The expansion of our business globally is essential to support its long-term, resilient growth. As well as creating additional capacity, it allows us to invest in the development of more new vehicles and technologies, which supports jobs in the UK.

“With its established premium automotive industry, Slovakia is an attractive potential development opportunity for us. The new factory will complement our existing facilities in the UK, China, India and the one under construction in Brazil.”

The city of Nitra in the west of Slovakia is dominated by an 11th century castle

The city of Nitra in the west of Slovakia is dominated by an 11th century castle

The announcement ends speculation that the company could pick Hungary, Poland, Mexico or even the US for its latest site, as the JLR looks to tap into lower labour costs.

The new plant is expected to produce its first car in 2018, and the company said the Slovak factory would manufacture aluminium vehicles, feeding speculation it could be used to build the JLR’s replacement for the Land Rover Defender.

About £1bn is expected to be invested in the new factory, taking the amount the company has spent on new facilities and products to £11bn over the past five years.

The news comes just days after JLR announced that its first-quarter profits had fallen by almost a third as demand for its cars fell in China.

Range Rover Evoque
The range Rover Evoque is the result of investment in new vehicles

The Range Rover Evoque is the result of JLR's investment in new vehicles

JLR said Slovakia was selected after “a robust analysis” of sites in other countries because it is “close to a strong supply chain and good logistics”.

A final decision on whether the plan will go ahead will come later this year, after the feasibility study has been completed, with the Slovak government indicating it expects this to come in September.

Robert Fico, prime minister of Slovakia, said: “The Slovakian government is delighted to be selected as JLR’s preferred location for this feasibility study.

“We are committed to developing Slovakia’s premium automotive industry and, should we be successful, this investment would represent a significant step forward in achieving this. It would provide a boost to our country’s wider industrial strategy as well as benefiting the European Union as a whole.”

Up to 8,000 jobs could be created in the factory and its supply chain if the plant goes ahead, providing a further boost to the Slovakian auto industry - already the fastest growing in central and eastern Europe. Slovakia's car output rose by over 70pc between 2008 and 2014, when almost one million cars were produced. VW also operates in the country.

Jaguar XE S - on sale 2015
Jaguar hopes its new saloons will take on established premium car rivals such BMW

Jaguar hopes its new saloons will take on established premium car rivals such BMW

Professor David Bailey, an auto industry expert at Aston University, said that the decision to pick Slovakia could be a hedge against “Brexit” – the UK leaving the EU – and fluctuations in exchange rates in the single currency.

“Poland had an advantage in that industrial labour costs an average of under €8.50 an hour, against over €10 in Slovakia, but Slovakia uses the euro, thus eliminating currency risk for selling into eurozone countries,” said Prof Bailey, adding that Slovakia already has a premium automotive sector, 320 auto supply chain firms, and a skilled workforce.

“This eastward shift is [partly driven by the fact that] JLR is about to ‘max out’ its UK operations at around 500,000 units so needs a new plant to grow output,” he added. “But by shifting production around and by running three shifts across its three UK plants, JLR could squeeze out as many as 600,000 to 650,000 units a year flat out in the UK.

“This isn’t so much about running out of capacity in the UK as JLR raising its output ambitions even further and the business being squeezed in the UK by a combination of skill shortages in the industry, exchange rate shifts, likely EU emissions fines and the UK’s planned carbon price floor.”

JLR’s readiness to invest in the new plant indicates that JLR is planning to target 1.5 million vehicles a year over the next decade, up from the 500,000 expected this year, according to Prof Bailey.

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