Land Rover and BMW

This was an interesting article from WSJ.

Jaguar Land Rover Nips at BMW's Heels
Luxury Auto Maker Invests in New Models, Factories to Challenge German Rivals

DETROIT—Jaguar/Land Rover is snapping at the heels of its bigger luxury car rivals.

Emboldened by three years of rapid growth, the U.K.-based auto maker is poking fun at Germany's BMW AG BMW.XE +0.83% , Audi AG NSU.XE +0.42% , and Daimler AG DAI.XE +0.84% 's Mercedes-Benz in its advertising campaigns, and ramping up investments in new factories and models.

"We are a small challenger that is probably going to start irritating people," said Andy Goss, JLR's global sales director. "We are coming up the rails," he said in an interview this week.

Buoyed by record sales of 425,006 vehicles in 2013, JLR is considering adding to production to keep up with booming demand just months after deciding to build factories in Brazil and China. JLR would consider the U.S. among other countries for the plant, Mr. Goss said.

"In terms of what happens next, it is more about selling cars in developing emerging markets, it is more about looking at product ranges and deciding where we need to go next and it is more about capacity planning to make sure we got the production facility to build it," Mr. Goss said.

The company is investing £1 billion ($1.64 billion) to build its first factory in China in a joint venture with Chery Automobile Co. that will be able to produce 130,000 vehicles a year when it starts production late this year. In Brazil, JLR is investing another £240 million to build a factory able to make 95,000 vehicles a year.

Jaguar Land Rover now runs an assembly facility in India for the Freelander 2 sport-utility vehicle and Jaguar XF sedan. It also has assembly operations in Kenya, Malaysia, Pakistan and Turkey and has testing and development centers in Dubai, the U.S. and at the Nürburgring racetrack in Germany.

An assembly plant in Saudi Arabia also is under consideration. "Saudi Arabia is perfect because of its bauxite ore that is used to make aluminum and its high energy resources," Chief Executive Ralf Speth, a former BMW executive, said on Thursday. "We would make small cars there," he said.

For now, rivals shrug off any threat that the Tata Motors Ltd. 500570.BY -0.01% unit might represent. Global demand for premium-priced sedans, sports cars, and sports-utility vehicles is sufficiently strong that the market can absorb the still relatively small volumes that JLR is producing.

A previous attempt to turn Jaguar into a major North American and global brand failed. When it was owned by Ford Motor Co. F -1.26% , Jaguar geared up in the late 1990s to expand sales to 200,000 vehicles a year, but fell well short of that goal, leading to sizable losses.

Should global demand stutter, the greater scope and scale of BMW and Audi, backed by deep-pocketed Volkswagen, VOW3.XE +0.49% and Jeep, a Fiat F.MI +3.55% SpA-owned brand, may be better placed to weather any future storms particularly given the economic malaise in India, Tata's home market.

JLR "does a good job," said Herbert Diess, the BMW executive in charge of research and development. But Mr. Diess said it isn't so much how much you spend, it is how you spend it.

"It is less about economies of scale and more about economies of scope," he said, referring to BMW's successful extension of its namesake and Mini brands into new market segments.

JLR is "a serious competitor" like other rivals, said Michael Manley, chief executive of the Jeep brand. But it does remain a niche player. Jeep sold 733,000 vehicles in 2013 compared with 348,338 at Land Rover. "I don't think there is any other SUV brand that sells 700,000 SUVs. Not even close."

JLR plans to spend between £3.5 billion and £3.75 billion in the fiscal year that begins April 1, a sharp rise from this year's £2.75 billion capital spending budget. Last year's capital spending comprised about 17% of its total revenue of £15.78 billion. In comparison, BMW spent €5.24 billion ($7.13 billion) in 2012. BMW plans to keep R&D spending running at around 5% of revenue, said Mr. Diess.

JLR also expects its dealers to spend £1 billion to strengthen their sales network.

JLR's Jaguar brand is aiming to boost its visibility with a Super Bowl ad starring its F-Type sports car that pokes fun at its German rivals. The campaign is inspired by the British actors that have so often played villains, notably German ones, in Hollywood movies.

—Marietta Cauchi contributed to this article.

Write to Santanu Choudhury at santanu.choudhury@wsj.com and Matthew Curtin at matthew.curtin@wsj.com