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Business News/ Companies / High base, slowing economy may halve JLR’s China sales growth
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High base, slowing economy may halve JLR’s China sales growth

Auto maker says sales growth may come down to about 20% this year, compared with the 40% growth seen last year

JLR will open a 130,000-unit-a-year factory in eastern Changshu city, about 110km northwest of Shanghai, on Tuesday. The auto maker will probably choose the best-selling Range Rover Evoque as its first local production model. Photo: Bloomberg Premium
JLR will open a 130,000-unit-a-year factory in eastern Changshu city, about 110km northwest of Shanghai, on Tuesday. The auto maker will probably choose the best-selling Range Rover Evoque as its first local production model. Photo: Bloomberg

Mumbai: Jaguar Land Rover Automotive Plc’s (JLR) China subsidiary expects sales growth to halve in its biggest market on account of the high base of previous years and slowing of the Chinese economy, the company said.

China, a key driver for Tata Motors Ltd-owned JLR both in terms of volume and profitability, accounted for 28.5% of JLR’s global sales for the quarter ended 30 June.

Bob Grace, the head of Greater China for Jaguar Land Rover, told Reuters that growth would halve to about 20% this year, compared with the 40% growth seen last year.

Growth may slow further next year, the news agency reported. “The market is a little bit slower in the second half, compared with the first half," Grace said.

China’s gross domestic product (GDP) grew 7.3% in the third quarter from a year earlier, official data showed on Tuesday, the weakest rate since the first quarter of 2009.

A spokesperson for JLR based out of UK confirmed that sales growth in China is likely to slow as indicated by company officials in China.

“JLR has a long-term commitment to the Chinese market. We are growing together with our local dealers and will continue to provide the best in customer satisfaction," said the spokesperson in response to an email. “Jaguar Land Rover has ambition to continue growing globally and are committed to driving localization to reach new markets and customers to create a stronger, more sustainable and agile business."

Jaguar Land Rover on Tuesday announced the opening of its overseas factory in China, the first outside UK.

Located in the Changshu Economic Development Zone, north of Shanghai, the factory is part of a RMB 10.9 billion ($1.78 billion) joint venture investment plan which is owned equally by JLR and Chery Automobiles, the company said in a statement.

China’s auto market expanded in September at the slowest pace in 19 months.

The market is in a state of flux with a government investigation into anti-competitive practices prompting makers such as Jaguar Land Rover to lower prices, Reuters reported.

Meanwhile, the luxury segment has taken a hit due to a government campaign against extravagance among public officials, said the report.

Domestic analysts, however, say the slowdown in the sales growth in China has been factored in.

“A 20% growth in China in calendar year 2015 is in line with our estimates. With the expansion in volumes, it’s difficult to grow at high rate," said Joseph George, analyst at IIFL Ltd.

In the six months to September, JLR China sales expanded 40% to 62,698 units, compared with a year ago.

“I believe the company is simply managing expectations. I don’t think the impact of base effect will be that big," said Mahantesh Sabarad, deputy head of research at SBICAP Securities Ltd. New launches and local production, he said, will help the firm maintain a high growth rate. Moreover, in the long-term, a re-balancing of China’s economy which seeks to focus on consumption-led growth, will spur demand for luxury cars, said Sabarad.

With a capacity to turn out 130,000 units per annum, the China facility will address the local market and first commence local production of the Range Rover Evoque.

By 2016, it would start manufacturing three Jaguar Land Rover models, the company said in a statement.

The local production would help the firm sell models at a more competitive rate as it shaves off import duty.

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Published: 21 Oct 2014, 09:34 AM IST
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