JLR's next move: Buy Vauxhall from PSA

Britain’s Jaguar Land Rover has been on a roll since separating from Ford in 2008. New models, new engines, new technology and new plants have more than doubled the automaker’s global sales to 583,312 last year.

Indeed, JLR’s turnaround, from a money-losing business Ford dumped for $2.3 billion, at a huge loss, to India’s Tata Motors, is one of the industry’s biggest success stories of the last decade.

But now the next -- and far more difficult -- challenge awaits: growing annual global volume to 1 million vehicles, a goal of JLR’s hard-charging German CEO, BMW-trained Ralf Speth.

Perhaps the best opportunity to do that quickly and affordably has appeared with General Motors’ sale of its money-losing Opel and Vauxhall brands to France’s PSA Group.

JLR should approach PSA about buying Vauxhall, a brand consisting of mostly rebadged Opel vehicles that is available only in the United Kingdom.

With the addition of the Range Rover Velar and the fifth-generation Land Rover Discovery, as well as filling out the Jaguar lineup with the XE compact sedan and F-Pace crossover, JLR’s volume should easily top 600,000 vehicles in 2017 -- barring any dramatic economic disruptions.

A new version of the rugged Land Rover Defender is coming, as is the battery-powered Jaguar I-Pace crossover. And Jaguar is expected to get at least one more crossover. There is speculation that a Land Rover or Range Rover smaller than the Evoque could be in JLR’s product plans. But those vehicles likely would add only incremental sales and wouldn’t propel JLR to 1 million light vehicles a year.

Adding Vauxhall to JLR’s corporate garage makes sense for JLR and PSA. The real prize in the GM deal was Opel, which alone accounts for about a 1 million vehicles a year.

Opel is strong in Europe and the Middle East, and has established a toehold in South America and Asia. Opel’s volume can help PSA lower production costs by spreading technology, platforms and components to Opel vehicles. Vauxhall will add little to PSA, except perhaps engineering costs to develop variations of Opels for the U.K.

Vauxhall’s volume has been holding steady at around 250,000 vehicle per year in the U.K.

JLR, with a mainstream brand such as Vauxhall, could expand into new segments and markets in which neither Jaguar nor Land Rover can compete. JLR engineers have been quietly working in India on Tata Motors’ core entry-level vehicles to make them more competitive in that tough market, so JLR engineers are gaining experience working on nonluxury vehicles.

If you look at JLR, it is clear that BMW is the company it has emulated most since the split with Ford. In fact, many of JLR’s top managers come from BMW, so it is no surprise that JLR is beginning to look a lot like a sort of British BMW.

But even BMW has a hedge against economic turmoil with its Mini brand, and it would not surprise me to see JLR eventually launch a nonluxury brand that helps it expand globally.

Vauxhall gives JLR a chance to do that with an established, functioning brand, instead of resurrecting a dead or damaged brand or trying to create a new one.

For PSA -- a company that was at death’s door five years ago -- it would be financially less burdensome to integrate one brand, Opel, into its product planning. Freed of Vauxhall, PSA wouldn’t have to worry about manufacturing low-volume cars in England once the country leaves the European Union.

As I walked past the Tata stand this month at the Geneva auto show, I saw a couple of really sharp cars and thought they could easily become Vauxhalls under JLR. I can envision a Subaru-like lineup of subcompact and compact all-wheel-drive sedans, hatchbacks, wagons and small SUVs, built by JLR, powered by three- and four-cylinder Ingenium engines, and wearing the Vauxhall badge. No vehicle like that could today wear a Jaguar or Land Rover name. JLRV has a nice ring to it.