SIME DARBY HOLDINGS BHD’s automotive arm is set to list in the second half of next year, and one potential sweetener in the pipeline is the assembly of British marques Jaguar and Land Rover.

According to industry sources, UK-based Jaguar Land Rover Ltd (JLR) has been looking to set up a contract manufacturing plant in Asean to serve the region, and Sime Darby is the top contender for the job.

Sime Darby is proposing to use its plant in Kulim to assemble two Jaguar and two Land Rover models. The popular Range Rover Evoque is likely to be included.

As it stands, Land Rover’s new line-up of Range Rovers has been enjoying strong sales, considering only CBU (complete built up) models are available in the market. Over the past three years, Land Rover’s sales have grown over 400%, to exceed 1,000 units last year. As at September this year, the carmaker had sold 635 units.

If Land Rover begins assembling its models here, which will make them cheaper due to lower tax imposed on locally assembled models, sales could easily double to around 2,000 units, says one local industry player.

“If Land Rover does assembly in Malaysia, it won’t be just for the local market. The assembly will be regional, and the cars can be exported as an Asean product to countries like Thailand and Indonesia. Add another 1,000 cars for each of these markets and you have about 4,000 units a year, and that’s just the start,” adds the industry player.

Jaguar’s numbers are less impressive in Malaysia, but it is estimated to have sold over 890 units in Asean in 2012. Nonetheless, its sales here and in the region should grow faster once local CKD (complete knock down) units hit the market.

Take the BMW 5 Series, for example. When CKD models became available in 2011, sales rose over 50% following an estimated 5% reduction in selling price.

The Asean Free Trade Area (AFTA) agreement allows import tax exemptions within the region as long as the goods have sufficient local content — typically, at least 40%.

Another boost for the project would be the incentives the government is expected to give, such as tax holidays and temporary concessions on local content requirements.

Local assembly of a well-established marque like Land Rover, especially for export to Asean, would also lend credibility to the National Automotive Policy, which was unveiled last year but has yet to gain substantial traction. This project is expected to get strong support from the government as well.

It is understood that DRB-Hicom Bhd has also been vying for the assembly job, as it has plenty of excess capacity at its various plants. However, Sime Darby has the advantage as it is already the exclusive importer and distributor for Jaguar. For Land Rover, Sime Darby has a 70:30 joint venture with Sisma Auto Sdn Bhd to distribute the vehicles.

Sisma Auto is wholly owned by Sisma Capital Sdn Bhd, which is controlled by businessman Syed Khalil Syed Ibrahim.

Meanwhile, India’s Tata Group owns JLR through Tata Motors Ltd. Combined, JLR is the largest automotive manufacturing business in the UK, with sales of 304,854 vehicles worldwide as at August this year. Land Rover’s sales alone rose 13% to 250,124 in the first eight months of the year.

Arguably, Land Rover’s sales still make up a relatively small contribution to Sime Darby’s motor business, which posted revenue of RM17.8 billion in the financial year ended June 30, 2014. In turn, the motor division contributed RM634.5 million to Sime Darby’s profit before tax or 14% of total profit.

In contrast, Land Rover (Malaysia) registered an after-tax profit of RM9.7 million on RM278.6 million in revenue for the financial year ended June 30, 2013.

Nevertheless, the growth potential of Land Rover in the region bodes well for Sime Darby’s automotive listing on Bursa Malaysia. It aims to raise an estimated RM3 billion.

Other brands that Sime Darby distributes in Malaysia include Mini, Hyundai, Land Rover and Porsche. In China, it focuses on premium brands such as BMW, Mini, Rolls-Royce, Lamborghini, Jaguar and Land Rover. In Hong Kong and Macau, the group has the BMW, Mini, Rolls-Royce, McLaren, Suzuki, Peugeot, Citroen and Mitsubishi franchises.

This article first appeared in The Edge Malaysia Weekly, on November 17 - 23, 2014.

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