Saudi aluminum plant attractive to British luxury auto maker

Updated 08 January 2013
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Saudi aluminum plant attractive to British luxury auto maker

LONDON: At a time when manufacturing is increasingly moving away from its traditional bases in the US and Europe and toward emerging markets, the news that British automotive giant Jaguar Land Rover is eyeing a plant in Saudi Arabia came as little surprise.
As Ralf Speth, chief executive of Jaguar Land Rover, pointed out last month, the letter of intent signed between the company and the Saudi National Industrial Clusters Development Program (NICDP) comes after an assembly plant project was announced in Shanghai, China, while a facility in Pune, India, will also be expanded.
Although talks are at an early stage, it is likely that aluminum production will be an area of interest for JLR – the automaker, like Audi, is one of few mainstream motoring brands to have adopted aluminum for its road cars. It is no coincidence that the announcement follows the development of the world’s largest integrated aluminum complex in Ras Al-Khair, which is due to begin production in 2014.
It is also no secret that Saudi Arabia and its GCC neighbors are incredibly lucrative markets for automakers as Europe and the US still struggles with the impact of the global recession. Consultancy Frost & Sullivan estimates that MENA is the fifth largest market for Jaguar and sixth largest market for Land Rover. Between April and September last year JLR sales grew by 21 percent and Land Rover by 33 percent. Jaguar XF sales grew 38 percent. “This is an exciting project that could enable Jaguar Land Rover to establish a joint venture partnership in a part of the world where luxury vehicle sales are expected to rise,” said Speth, quickly re-assuring those at home in the UK that a push into Saudi Arabia does not mean a pull-out of Britain. “If we proceed, it will complement our existing expansion in the UK and elsewhere,” he said.
Recent research by Euro Monitor International revealed that 94 percent of households in Saudi Arabia have an annual disposable income in excess of $10,000, while 86 percent earn more than $15,000. Car registrations are now significantly outpacing population growth in the Gulf state, spurned on by low petrol prices. As a result, Subhash Joshi, program manager at Frost & Sullivan’s automotive and transportation practice expects the luxury car market in the region to grow by a 20 percent minimum year-on-year
“Setting up a local assembly plant is expected to aid JLR to capitalize the available opportunities in the region, and it would also allow free movement of vehicles within the GCC – meaning no tax,” he said. “KSA allows imports of most of the raw materials and components with the nominal import duty of 5 percent.”
But pitfalls could remain. The recent drive to push greater numbers of Saudis into jobs in the kingdom – by introducing the controversial “expatriate tax” as well as quotas on companies for the number of nationals they employ – could hit specialist industries such as auto manufacturing, where the need for experienced manpower is paramount. Questions also remain about the availability of components other than aluminum in Saudi Arabia, and the costs associated with the mass import of them.
That said, JLR is not the first company to set up a manufacturing plant in Saudi Arabia, and the recent experience of Japan’s Isuzu Motors bodes well. Isuzu announced its intention to set up a plant with a capacity of 25,000 commercial vehicles in June 2011 and the Damman-based facility opened in December 2012 – a rapid turnaround for a project of its scale. With regard to components, commercial vehicle manufacturers have operated in the kingdom for decades, so a supply chain does exist.
“The development of large scale local vehicle assembling facilities would attract component manufacturers to set up production unit in the region to remain competitive,” Joshi said, adding that subsidised electricity and an availability of land – outside of city centers – were further benefits.
Given all this, it is possible that other major manufacturers, while perhaps not going as far as manufacturing in the kingdom, may seek to push themselves further into the Gulf to capitalize on growth still lacking in their traditional markets.
“We expect key vehicle manufacturers like Ford, General Motors and Hyundai who have realigned their global strategies to support their regional presence in the MENA. The luxury car makers like Lexus, BMW, Range Rover, and Porsche also have started focusing on the MENA region,” Joshi said.

— Exclusive to Arab News


US unveils new veto threat against WTO rulings

Updated 23 June 2018
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US unveils new veto threat against WTO rulings

  • US tells WTO appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days
  • Trump, who has railed against the WTO judges in the past, threatens to levy a 20 percent import tax on European Union cars

GENEVA: The United States ramped up its challenge to the global trading system on Friday, telling the World Trade Organization that appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days.
The statement by US Ambassador Dennis Shea threatened to erode a key element of trade enforcement at the 23-year-old WTO: binding dispute settlement, which is widely seen as a major bulwark against protectionism.
It came as US President Donald Trump, who has railed against the WTO judges in the past, threatened to levy a 20 percent import tax on European Union cars, the latest in an unprecedented campaign of threats and tariffs to punish US trading partners.
Shea told the WTO’s dispute settlement body that rulings by the WTO’s Appellate Body, effectively the supreme court of world trade, were invalid if they took too long. Rulings would no longer be governed by “reverse consensus,” whereby they are blocked only if all WTO members oppose them.
“The consequence of the Appellate Body choosing to breach (WTO dispute) rules and issue a report after the 90-day deadline would be that this report no longer qualifies as an Appellate Body report for purposes of the exceptional negative consensus adoption procedure,” Shea said, according to a copy of his remarks provided to Reuters.
An official who attended the meeting said other WTO members agreed that the Appellate Body should stick to the rules, but none supported Shea’s view that late rulings could be vetoed, and many expressed concern about his remarks.
Rulings are routinely late because, the WTO says, disputes are abundant and complex. Things have slowed further because Trump is blocking new judicial appointments, increasing the remaining judges’ already bulging workload.
At Friday’s meeting the United States maintained its opposition to the appointment of judges, effectively signalling a veto of one judge hoping for reappointment to the seven-seat bench in September.
Without him, the Appellate Body will only have three judges, the minimum required for every dispute, putting the system at severe risk of breakdown if any of the three judges cannot work on a case for legal or other reasons.
“Left unaddressed, these challenges can cripple, paralyze, or even extinguish the system,” chief judge Ujal Singh Bhatia said.
Sixty-six WTO member states are backing a petition that asks the United States to allow appointments to go ahead. On Friday, US ally Japan endorsed the petition for the first time, meaning that all the major users of the dispute system were united in opposition to Trump.