Ailing Jaguar Land Rover Has Options, But None Look Tempting.
“JLR’s future is clear and our Reimagine Strategy is being led by Mardell. With Reimagine, we are transforming JLR into a sustainability rich, all electric, modern luxury creator, meeting our commitments to deliver carbon net zero”
Jaguar Land Rover is in dire straits and needs much bigger sales and a massive electrification budget to compete against Europe’s premium auto market leaders like BMW, Mercedes and Audi. Given that neither is very likely, the quicker it picks a partner or succumbs to a takeover, the sooner it can breathe easy.
That’s the challenge facing the replacement for former CEO Thierry Bollore, who left JLR last week, about 2 years after replacing ex-BMW executive Ralf Speth. No word yet on who his replacement might be, but Jaguar Land Rover points out that the company is currently led by interim CEO Adrian Mardell, who has over 30 year’s industry experience.
“Jaguar Land Rover’s future is clear and our Reimagine Strategy is being led by Mardell,” JLR said in a statement.
“With Reimagine, we are transforming Jaguar Land Rover into a sustainability rich, all electric, modern luxury creator, meeting our commitments to deliver carbon net zero by 2039,” the statement said.
But whoever ultimately gets the call to lead JLR might well look towards the fate of Volvo of Sweden, also an undersized, struggling, upmarket wannabe, which prospered after being taken over by China’s Zhejiang Geely Holding Group.
Professor Ferdinand Dudenhoeffer, director of Germany’s Center for Automotive Research (CAR), said Tata Motors of India’s JLR is the global industry’s biggest problem because of its lack of volume and slow electrification pace.
“JLR has a total of 14 models with just 300,000 sales or around 21,500 sales per model line. You can only restructure and that means radical cuts or the sale of JLR. And the selling price should be very, very low,” Dudenhoeffer said in an interview.
“There are far too many models and most have CO2 (EU anti-carbon dioxide regulations) problems with high penalties likely,” Dudenhoeffer said.
And it’s not just the German competition that threatens JLR; its Tesla and the Chinese.
“The high-tech Chinese carmakers are coming next to Tesla with BYD, NIO, Xpeng and others. The Chinese have important software functions that would cost a lot of money to create at JLR. The same applies to modern battery-electric vehicles that are ahead of the I-Pace (Jaguar’s battery-electric SUV). So it’s a very sad situation,” he said.
British-based automotive analyst Charles Tennant agrees JLR is in big trouble and hasn’t made a profit since 2018 when sales reached just over 600,000 vehicles worth £25 billion ($30 billion) and profits hit £1.5 billion ($1.8 billion).
“Since then, JLR has not returned a profit and it has been a sorry tale of falling sales, financial losses, investment write-offs, and a painful downsizing through thousands of job losses. The problem for JLR was that they were heavily invested in diesel power which was becoming a dirty word after the VW “dieselgate” fiasco, the Jaguar saloons (sedans) were not selling well, and they were not pushing vehicle electrification hard enough,” Tennant said in an email exchange.
The long-term plan was to reach sales of 1 million vehicles a year. In the financial year ended March 2022, sales were just under 300,000.
As upmarket competitors like BMW and Mercedes banked big windfall profits during the recent semiconductor scarcity, JLR’s bottom line was swamped with red ink. The Germans were forced to cut sales too because of a lack of chips, but simply withdrew models that made small profits and concentrated on selling sedans and SUVs with the biggest profit margins.
According to Tennant, because of the chip shortage, JLR, bought by Tata from Ford MotorF 0.0% Co in 2008, now has an order backlog of over 200,000 vehicles, mainly Range Rovers and Defenders. According to the Financial Times, Bollore was removed because of his inability to handle the semiconductor crisis.
Bollore did take some aggressive action. He cancelled plans to produce battery-electric versions of the top-of-the-range Jaguar XJ, and a big Jaguar J-Pace SUV. This reported £1 billion ($1.1 billion) write-off was greeted with dismay by some critics. Bollore declared Jaguar would not only be all-electric by 2025 but would cease competing against the likes of Audi and Lexus and would reach into the stratosphere for the massive profits but low sales world of Bentley and Aston Martin. This plan has yet to be detailed but expect it to end its ability to steal SUV sales from Land Rover.
Land Rover does have some success to brag about. The old Defender was the smallest seller, but the new one, launched in 2019, is now the most successful with production reaching 60,000 this year, according to French auto consultants Inovev.
“Other models of the brand this year range between 20,000 and 40,000 units, distributed as follows: 40,000 Range Rover Evoques, 36,000 Range Rover Sports, 30,000 Velars, 20,000 Discovery Sports, and 5,000 Discoverys,” Inovev said.
Unfortunately, the trend is down.
“Overall, Land Rover production has lost 147,000 units between 2019 and 2022, despite the introduction of the new Defender. This represents a 39% drop,” Inovev said.
Analysts have wondered if Jaguar, which sold 86,270 sedans, sports cars and SUVs in 2021, might be sold off on its own. Who would want it though? BMW has an electrification engineering arrangement with JLR but seems unlikely to want to remind investors of its disastrous previous Rover involvement. Peugeot-Citroen had seemed interested before it became part of the Stellantis empire.
CAR’s Dudenhoeffer says action is required to secure the future of JLR but the options make clear why he describes its future as uncertain. A Volvo-style Chinese deal is a possibility.
If JLR remains with Tata, big cuts are likely.
“As a Tata subsidiary, there is probably nothing left but to radically cut the models and to continue working on a small flame with a joint venture – possibly with BMW. To do this, the entire company would have to be downsized. Not a nice thing. And whether you can then be successful with 100,000 or 200,000 vehicles is a big question.
“In my opinion, selling would be the better option. It’s hard to say whether it’s Stellantis or a Chinese one. I would rule out Toyota. So… JLR is the toughest problem in the entire auto industry,” Dudenhoeffer said.
There is another option, but very much a last resort. JLR needs a partner other than Tata because the Indian company doesn’t have the financial or electrification expertise. The obvious partners are Chinese, already gathering to assault the European electric vehicle market. The likes of SAIC, already big in Europe with its MG brand, Geely or BYD are in the frame. Companies like these have the required financial power and technical expertise. SAIC has shown what a well-known brand can do for an unknown company’s market credibility.
Coming out of left field would be interest from high-tech companies like AppleAAPL +1.9% or Google, said to be mulling automotive incursions.
But if JLR fails to attract rescuers, here’s the last resort. If it was in danger of failing, a plea to the British government to protect jobs and high technology would be a hard political case to turn down.
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