Luxury car maker drives hard bargain to head towards Slovakia

14-08-2015

Slovakia appears to have won the beauty contest to be the site for a new factory for luxury car maker Jaguar Land Rover. Poland looks like it was in second place with the Czech Republic in third. Details of the full deal and incentives could make it clear whether the Czech bid suffered from lower permitted aid ceilings than both Slovakia and Poland.

Photo: Jan ŘíhaPhoto: Jan Říha The foreign direct investment success stories are often crowed about by the chosen government and region and greeted with silence by the losing contenders. And that is more or less the case with Jaguar Land Rover’s signal that Slovakia is now in pole position to be the site for a new 300,000 a year car plant probably starting up in 2018. The two sides will now work on a study of how the new car plant can be realised.

The crowing from the Slovak side is still a bit muted since the British-based luxury car maker has so far just said that Slovakia, to all purposes a site near Nitra in the west of the country, is its preferred location. A final agreement and the details of the investment package offered to seduce Jaguar Land Rover will only become apparent later. Slovak prime minister Robert Fico repeated Friday that he was not giving more details until the deal is sealed.

Poland and the Czech Republic were also in the running for the car plant, though the rumor mill circulating since the start of the year about the investment always seemed to put the Polish and Slovak chances ahead of the Czech. Fico suggested that was the case himself in a press conference on August 11 when he said that the Slovak offer had succeeded in the last weeks of overtaking the rival Polish offer. One factor in Poland’s favour had been reported to be lower labour costs than both Slovakia and the Czech Republic.

According to the Slovak government, one of the main points in favour of Slovakia was its strong supplier network for the auto industry and good communications. That argument would have presumably held good for the Czech Republic as well, if not more so. If confirmed, the latest move will reinforce Slovakia’s already established position as the worldwide leader for car production per head.

As well as sites in Europe, Jaguar Land Rover also looked at locating the new plant in the United States and Mexico. Hungary and Turkey were also said to have been in the frame. Jaguar Land Rover already has a plant in China and another is due to open in Brazil next year, though the company says the location decisions there were taken more with an eye on getting round import duties than on production costs.

When the full story of Jaguar Land Rover’s deal with Slovakia comes out, it will be interesting to note what were the incentives offered to land the factory at Nitra. This should help determine whether Czech fears are coming true that they are now vulnerable to being outbid in aid offered by Slovakia and Poland as a result of lower aid ceiling set by the European Commission.

14-08-2015