JLR turns to Stellantis to build tariff-proof Defenders

Manufacturing footprints are usually redrawn slowly, plant by plant, model cycle by model cycle. JLR's reply to the US' tariff wall is different. Rather than shifting an existing production line across the Atlantic, the British carmaker is building an entirely new one, on another OEM's shop floor.

The vehicle manufacturer confirmed on its August 13 earnings call that its planned collaboration with Stellantis, first announced in May, will include actual assembly on US soil. A memorandum of understanding between the two carmakers is due to be formalised by the end of the year, and will see new Defender-branded vehicles developed and built at Stellantis' facilities in America.

A tariff wall, and a way round it

Here's why. JLR imports every vehicle it sells in its largest market, and duties introduced in 2025 add 10 per cent to UK-built cars and 15 per cent to those arriving from the EU, a category that includes the Slovakia-built Defender.

Richard Molyneux, JLR's chief financial officer laid out the rationale, stating the carmaker knows it needs to get some production on the right side of the tariff barrier.

That puts JLR several years behind rivals who read the geography earlier. BMW and Mercedes-Benz are already inside the tariff barrier, with large SUV plants in South Carolina and Alabama respectively that have run for decades. Volvo already builds its EX90 in the US and is preparing to add the XC60 there too. For an OEM whose profitability leans so heavily on its American customers, standing outside that tariff barrier was becoming an expensive position to hold.

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"New segments" - not new factories for old models

What makes JLR's response notable is what it is not doing. Molyneux was explicit that localising its existing model range would not make commercial sense at JLR's volumes, noting the carmaker sells around 30,000 Defenders annually in the US and cannot achieve efficient localisation at that scale, or even at 50,000 units.

Instead, the plan is to enter what Molyneux called "new segments" with Defender-branded vehicles engineered alongside Stellantis. JLR has not detailed which segments it has in mind, though the shape of the opportunity is not hard to infer. A body-on-frame Defender built on Jeep Wrangler underpinnings would let JLR compete again in the rugged, dedicated off-roader category it effectively vacated when it repositioned the current Defender as a premium model.

That segment remains lucrative in the US, contested by the Jeep Wrangler itself, the top-end Ford Bronco, Volkswagen Group's new Scout brand and the Ineos Grenadier. For Stellantis, supplying underpinnings and manufacturing capacity to a premium partner is a way of monetising Jeep architecture beyond its own badge, and of putting underused capacity to work.

A hedge as much as a plant

Tariffs are, however, only part of the equation. Molyneux also framed US production as a currency hedge, describing the OEM as sitting on an extremely large long-dollar position and arguing that building in America creates a natural hedge against dollar and pound fluctuations. As JLR's American business grows relative to the rest of the group, that currency exposure only compounds, making a domestic manufacturing base as much a treasury decision as an industrial one.

Chief executive PB Balaji said at the carmaker's investor day in June that he wants the US business to eventually match the size of the entire JLR business today. North America is already the group's largest market, accounting for just under 100,000 sales of Range Rover, Defender, Discovery and Jaguar models in the financial year to March 31, or 28 per cent of total sales of 352,389. That share climbed to 34 per cent in the quarter to June 30.

The China problem sharpens America's pull

The US' growing importance is partly a story of decline elsewhere. China, once JLR's largest market, saw sales fall 26 per cent in the latest quarter to just 11 per cent of the total, part of a broader retreat by European premium brands as Chinese buyers pivot rapidly away from combustion models. Molyneux was unsentimental about the prognosis, saying China is unlikely to get any easier for the carmaker.

Betting on higher margins over higher volumes

The US, by contrast, suits JLR's strategic instincts. The vehicle manufacturer has been steering deliberately toward higher-end, higher-margin models, targeting 10 per cent annual revenue growth and an average selling price above £80,000 ($108,000) per car, up from £75,300 ($102,000) in the quarter to June 30. JLR does not disclose profit by market, but has long said the US delivers its highest per-vehicle returns thanks to stronger overall pricing.

Even so, Balaji was open about how much room JLR has left to capture. He described the OEM's American penetration as nothing to write home about, and said JLR remains a tiny speck of that market.

That combination, a market too important to serve from behind a tariff wall, too profitable to leave under-penetrated, and too different from the existing model range to justify localising it, explains why JLR has chosen partnership over replication. Building a new Defender lineage inside Stellantis's American footprint lets it chase all three goals without betting its own capital on a fourth US plant. The strategy is growing.