Jaguar breaks with tradition, eyes mass market SUVs, sedans

By Rhys Jones

LONDON (Reuters) - Luxury carmaker Jaguar said it would invest $2.4 billion in a new range of lightweight aluminium sports sedans and crossover SUVs aimed at the mass market, creating 1,700 jobs in a British economy showing signs of resilience.

The spending is part of a move to launch more affordable models from 2015 to emulate the success of lower cost luxury vehicles made by its sister company Land Rover, and will better position it to compete with its larger German rivals.

Jaguar, part of the Jaguar Land Rover (JLR) group owned by Tata Motors (NSI:TATAMOTORS), said the investment could create a further 24,000 in supply chain jobs.

"The creation of 1,700 new jobs and £1.5bn investment by Jaguar Land Rover is a great vote of confidence in the UK economy," British Prime Minister David Cameron said on Twitter.

British car sales rose by 11 percent in August, the 18th consecutive month of growth, in contrast to Germany, France, Italy and Spain, which all suffered sales declines.

Britain's finance minister, George Osborne, said on Monday that the UK had turned the corner and that an accelerating economy vindicated his austerity programme.

JLR has roared to health in the four years since Tata Motors bought the group from Ford (NYS:F) for $2.3 billion.

It has escaped the cycle of plant shutdowns and falling production at many European automakers by tapping into growing demand for luxury cars in emerging markets.

Despite falling sales at home amid a sluggish Indian economy, shares in Tata Motors surged as much as 10 percent to a record high on Tuesday, outperforming the broader Nifty that was up more than 3 percent.

Also on Tuesday, Jaguar Land Rover said August sales rose 28 percent from a year earlier to 27,852 vehicles.

CROSSOVER BOOM

Carmakers around the world are expanding into so-called premium "crossover" vehicles, seeking to tap demand for models that combine the functionality of sport utility vehicles (SUVs) with the comfort and performance of luxury cars.

Nearly one in every four premium vehicles sold last year in Europe was a crossover or SUV, and the category continues to grow, despite concerns about size and fuel consumption, according to UK-based consultancy LMC Automotive.

Jaguar's new models will compete directly with the likes of Germany's BMW (GER:BMW.DE - News) and Daimler's (GER:DAI.DE - News) Mercedes-Benz which dominate the market for entry-level luxury vehicles.

Jaguar said cash would be spent to design systems to help it introduce new one-piece "aluminium vehicle architecture".

The new models will be built on production lines previously used to make Land Rover vehicles at JLR's plant in Solihull, central England, where some 1,700 new jobs will be created.

A Jaguar sports sedan, due to be launched in 2015, will be the first to feature the new technology. It will also be the first car to use engines from JLR's new engine plant in nearby Wolverhampton.

Next up will be Jaguar's first ever sports crossover vehicle, called the C-X17, also featuring an aluminium frame, which is being showcased at the Frankfurt car show this week.

"The inherent flexibility of this all-new technology will enable the Jaguar Land Rover business to not only enter but aggressively compete in exciting new segments, creating new markets for both brands," JLR's Chief Executive Ralf Speth said.

(Reporting by Rhys Jones in London and Prashant Mehra in Mumbai; Editing by David Cowell and Jeremy Laurence)