Jaguar Land Rover is preparing itself for a bigger footprint in South America, with plans to assemble its popular Freelander four-by-fours in Brazil within the next year and a half, according to a report on Monday.

Jaguar Land Rover, which, has been considering its options in Brazil for a number of months is looking at assembling Completely Knocked Down Kits of the car as a means to building up volume in the country, Mr Ralf Speth, CEO of Jaguar Land Rover, told the Financial Times on Monday. “We thought about setting up a plant or assembly line, but you need a critical mass of volume,” he told the paper.

“We are in discussions with a number of parties,” a spokesperson for the carmaker said on Monday, declining to give further details. Many of the world’s largest automakers already have a production presence in the country, including Fiat, Volkswagen, and Ford, as does Mercedes-Benz, while Hyundai is set to begin production later this year in Brazil. However, BMW is yet to make a decision on a plant in the country.

There is some short-term uncertainty in the Brazilian market, which could explain JLR’s hesitance to go for full-fledged production. Firstly, the policy environment has been relatively volatile. The Brazilian government has been incentivising carmakers towards more domestic production, including through a 30 per cent rise in the import tax on cars built abroad last year. In addition, tough credit conditions, rising defaults on car loans and a weak currency have also hit sales in recent months.

Longer term, the market’s prospects remain bright. Brazil is currently the world’s fifth largest passenger car market by sales, according to IHS Global Insight, with sales for 2012 expected to reach 3.125 million units. It is expected to overtake Germany by 2013, and become the world’s third largest car market (after China and the US) by 2017.

“JLR want to position themselves in the market to generate greater sales in the future,” says IHS Global Insight analyst Ian Fletcher. “The assembly of CKD kits is a good entry point…you can develop a good base, a strong dealership network and interest in the brand, and training people before shifting to a full production line or a component supplier base.”

(This article was published on July 16, 2012)
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