Jaguar Land Rover could move some production to developing markets such as Russia, China and Brazil to avoid import tariffs on British products by the Chinese government.

The Birmingham Post today said JLR CEO David Smith, speaking at a fringe meeting of business leaders to discuss the future of British manufacturing at the Conservative Party conference in Manchester yesterday, said that JLR must shift some production overseas to avoid import tariffs set by the Chinese government.

China imposes a 10-per cent tariff on imported auto parts, but since April 2005, it has imposed a higher 25-per cent charge if they account for 60 per cent or more of the finished product's value.

It also slaps a 25-per cent tariff on the import of finished automobiles. But it has no problems if foreign car companies want to set up manufacturing facilities in China.

JLR sells more of its vehicles overseas than in the UK market.

In Februaury this year, a Chinese trade delegation to Europe signed a life-saving deal worth £600 million with JLR to purchase13,000 vehicles over the next three years. (See: China bails out JLR with £600-million order). 

JLR will supply 10,000 Land Rover Freelander 2 4x4 vehicles and 3,000 Jaguars including the Jaguar X-Type cars over a three-year period, enabling the iconic British brands to ride out the global recession for the next three years till the British and European economy heal themselves.
Last year JLR sold 2,000 Jaguars and 11,000 Land Rovers.

In 2006, the US, Canada and the European Union had complained to the WTO, which ruled in July 2008 that China's policies were inconsistent with the group's rules.

China had appealed against the ruling, but the WTO's appeal body upheld the original verdict in December.

But China still maintains a 25-per cent tariff if 60 per cent or more of a finished car is imported and creates barriers for importing finished automobiles to protect its own car manufacturers.

The UK newspaper quoted Smith as saying, ''A couple of weeks ago I announced a whole new business plan for the company. It is going to require multi-billion pound investments over the next five to 10 years. I'm sure this is going to be one of the largest manufacturing investments any company makes in the UK.

''It means developing our product portfolio, environmental innovations and our export markets. We will need to manufacture some products overseas. If we are to get over 100-per cent tariff barriers in places like China, we will have to manufacture in China.''

''What we are saying is that as we grow our business with new models and new investment, in key developing markets such as Brazil, India, China and Russia, we may look at options for local manufacturing.''

Plant consolidation in the UK
In a bid to consolidate its UK operations, last month Tata Motors, JLR's parent, said that it was planning to merge two of its three Jaguar Land Rover plants in the Midlands over the next five years. (See: Tata Motors to merge JLR plants, create additional 800 jobs)

The move would not affect any jobs, JLR said, but create 800 new jobs at the Halewood plant producing the new baby Range Rover model.

JLR will merge its two West Midlands factories, one at Castle Bromwich in Birmingham, which makes Jaguars and the other in Solihull that makes Range Rovers, into one by 2014.

Production and work will be transferred in a phased manner from 2010 until 2014 between the sites, which are located only eight miles apart.