David Cameron, the prime minister of the UK, has been in China this week leading a wide-ranging trade mission that included the aim of setting up of a Jaguar Land Rover plant there to meet demand and avoid the high import duties the carmaker is paying.
The steep tariffs are reported to almost double the sales tag on certain vehicles that Jaguar Land Rover sells in the country.
China has been important in Jaguar Land Rover’s recovery from the recession with sales of Land Rover there between April and June nearly double those in the same quarter a year ago. More than 14,000 vehicles were sold in China between January and July, with Land Rover's sales increasing by 122% and of Jaguar's by 86%.
Vince Cable, the UK’s business secretary, who was part of the trade delegation, arrived in China on Monday and opened a new showroom for Jaguar Land Rover in Beijing.
The Tata-owned luxury carmaker will invest £100m ($162m) in the proposed new facility, which sources say is likely to be located in Nanchang, capital of Jiangxi Province in south-eastern China. It is planned to have an output capacity of 50,000 vehicles, built from knockdown kits.
Tata is reported to have hired Stefan Berger, an expert in Chinese joint ventures, to help secure the agreement.
According to the company JLR could “begin immediately” if it struck a joint venture deal with a Chinese industrial partner and has stated it already has a facility for packing sub-assemblies at its Halewood facility in the UK Midlands.
The plans to establish a manufacturing presence in China build on comments made earlier this year by chief executive Carl-Peter Forster who said that JLR planned to manufacture "at least two models in China" and plans to start with the Freelander and smaller Evoque Land Rover before introducing a Jaguar model. That said, the company is distancing itself from any definite model choices until a decision to go forward on the plans for China are confirmed.
In a separate development, a strike over pay in the UK by up to 800 workers at JLR’s inbound logistics service provider DHL Supply Chain could affect production at the beginning of next week.
The majority of workers based at JLR’s sites at Halewood, Castle Bromwich and Solihull have voted in favour of strike action over a pay dispute and they include forklift drivers and warehousing employees.
According to the Unite union’s national officer for logistics, Paul Davies, a deal has been agreed with truck drivers, which is understood to be 6%, but other members have asked the union to negotiate for a better deal.
“Jaguar Land Rover has reached a pay award with its own staff,” said Davies, “and while the DHL employees are only indirectly employed by the vehicle maker, they can’t help but look at Jaguar rewarding its staff.”
For its part DHL stated that it was in "productive dialogue" with its employees and Unite officials regarding the wage negotiations.
"DHL has put forward an improved wage offer in relation to its employees, which has received a recommendation for acceptance from Unite. DHL has not been served with notification from Unite regarding the commencement of any industrial action and remains optimistic that the wage claim will be quickly resolved," the company stated.