For JLR, it boils down to fair and free trade in post-Brexit era

It was a delighted Ralf Speth who spoke glowingly of the Jaguar I-Pace concept car during its unveiling at the Los Angeles Auto Show. The Chief Executive Officer of Jaguar Land Rover was clearly proud of this electric initiative which will make its debut in 2018.

Beyond this, it has been an extraordinary year for Speth. He was recently inducted on the board of Tata Sons at a time an ugly war of words is erupting with alarming regularity between two warring camps. JLR has also been going through a geopolitical rollercoaster side thanks to the growing anxiety on Brexit.

A Britain breakaway from the European Union (EU) was something that Speth was definitely not looking forward to as the fallout could have been catastrophic from the viewpoint of costs. What he feared has finally happened and while alarm bells are not ringing yet, he sounded a word of caution at the LA Auto Show. “It is important that we get tax-free, duty-free, fair and free trade,” said Speth. “We have to buy a lot of parts from Europe, where the weak currency is hitting us. We have to see how this complete system will change and what kind of regulations are going to come.”

He also refused to comment on reports of the UK government’s assurances to Nissan, which have prompted the automaker to continue with its product plans in the UK. It is not clear what transpired in these talks but there was no way Nissan would have continued to invest unless there was some guarantee of British free trade continuing with the EU.

“We don’t know what they have done for Nissan and I am not interested. The UK government knows that JLR is a significant contributor in the overall society,” said Speth. The Tata Motors-owned British brand duo is the largest carmaker in Britain and there will be no way the government will attempt to upset the applecart.

“It is important that we have free trade, free tariffs and all access to skills with EU countries,” added Speth. Even prior to the dramatic verdict of June, JLR had announced that it was setting up a plant in Slovakia, Central Europe, with a clear intention to insulate itself from any crisis arising from a possible Brexit. The ground breaking ceremony was carried out in September and it will be a good two years before the plant is commissioned.

In the interim, there is no telling what could happen within the EU with elections due in Austria, Germany and France. The threat of right-wing governments coming to power in some of these countries could again lead to Brexit-like situations affecting the very core of the EU’s creation.

“We have to make sure that we run our small JLR company like a small satellite and that we are fit for the future. We have to focus on products, products, products and at the end of the day, it is the passion of people, so that we won’t have to fear about the future,” said Speth.

Europe is a big market for JLR, as is the case with other carmakers with operations in the UK, and it just cannot afford to let it slip through its fingers. “There is really no other choice but to go global. Europe is a big market for us and it makes sense to have a base in Slovakia from the viewpoint of a supplier network and so on,” Speth had said during an earlier interview at the Delhi Auto Expo this year.

After being acquired by Tata Motors nearly a decade ago, JLR has spread its global footprint to China and, more recently, Brazil where it commissioned its plant in Rio de Janeiro. All this has happened in the backdrop of tremendous global volatility where South America and Russia have seen their automobile markets come under tremendous pressure.

And though Brazil has taken a huge hit, the fact remains that it was one of the fastest growing economies until last year which was the reason for JLR to set up shop their. It is very likely that it will now become the company’s mother plant in South America.

By virtue of its sheer size, China is potentially JLR’s most attractive market. The carmaker had some headwinds last fiscal when nearly 6,000 cars were gutted in the Tianjin port fire. There were also supply-related problems with some models, which did not make it to the market on time. Speth was quite stoic on growth projections during the interaction. “Volumes depend on economic growth, political issues and so many different things. We cannot plan anymore like the way we used to 10 years ago. Therefore we have to be flexible,” he explained.

From his point of view, JLR is a premium brand where volumes are not the sole determinant. “You can generate a lot of volumes, but then you will have to spend a lot of money on marketing and it will be out of balance,” added Speth. Given the high levels of political uncertainty across the world, he said the company was “cautiously optimistic” about growing on a sustainable and a profitable basis.

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