Jaguar’s Conflicted Future; “Reimagined” Partnership, Takeover, Or Demise?
“Five years is a relatively short period in which to execute this shift, especially if it is still looking for a partner”
The storied Jaguar brand’s prospects remain murky as it reinvents itself as a slimmed-down, soon to be an all-electric outfit which doesn’t steal sales from its Land Rover SUV sibling and come last in quality surveys.
Will it survive as a brand within the Jaguar Land Rover organisation, which itself is said to be too small to compete with the likes of BMW, Mercedes and Audi? JLR desperately needs volume to survive and must at least seek a partner or succumb to a takeover. Many see a Chinese company stepping in along Volvo/Geely lines, but others say JLR’s Indian owner Tata Motors won’t stand for that.
JLR’s CEO Thierry Bollore has declared improving quality is job one, but that might not be too important when you consider Tesla regularly performs poorly in consumer surveys, but is an investor favorite because of the raw power of its brand.
After Jaguar Land Rover’s recent 5-year “Reimagining the Future” strategy announcements Jaguar dumped its XE, and XF sedans and said it would go all-electric by 2025, the future remains unclear to investors. Just what will the new Jaguar line-up look like in all-electric mode and how to make sure they won’t steal sales of Range Rovers and Land Rover SUVs?
The future of Jaguar has been cloudy for some time, as its ageing sedans foundered in the post SUV world. And its new range of SUVs – F-Pace and E-Pace possibly being followed by a monster J-Pace – cannibalized sales from Land Rover, the SUV specialist.
Some have suggested Jaguar reinvent itself as a more Bentley or even Rolls Royce-like upmarket brand with far fewer sales but monster margins. This sounds easier said than done to say the least. Other questions surround the whole future of Jaguar as an independent company. Does it have one, or would its combination with Land Rover be big enough to ever compete with the much bigger and more cost competitive opposition like BMW, Mercedes and VW’s Audi? Would Tata decide to sell off Jaguar or all of JLR?
Who would buy it?
The question of who would buy JLR or just the Jaguar bit stumble on the possibility of a candidate. BMW has an arrangement with JLR on electric engineering, but given its ill-fated flirtation with Rover in 1994, it’s unlikely to want to repeat that experience. Groupe PSA was thought to be a interested, but after its merger with Fiat-Chrysler it has a huge task of rationalizing all the brands to have time for JLR. Chinese companies eager to emulate Zhejiang Geely Holding of China’s successful takeover of Volvo of Sweden might want to step in, but Tata Motors is thought unlikely to sell to the Chinese, at least in the short-term before 5-years of trying to make the plan work.
CEO Bollore has said it will look outside JLR for partners to develop the new range of Jaguar electric cars. Analysts wonder how Jaguar can justify this financially, given its small volume of just over 100,000 in 2020. Land Rover will get its first all-electric vehicle in 2024. JLR has abandoned its target of annual sales of 1 million and is now trying to be profitable selling between 400,000 and 450,000 vehicles a year. Last year, sales fell 24% to 426,000, including about 324,000 Land Rovers and just over 100,000 Jaguars, off 37%.
Some analysts say Jaguar’s new lineup must differentiate itself strongly from Land Rover and should therefore be mainly sedans while others say it could sell SUVs that were differentiated by luxury, and by targeting different types of consumers.
Ian Fletcher, autos analyst at IHS Markit, said Jaguar’s range will be far narrower, but will likely retain the I-Pace electric SUV, which could support the plan to move upmarket.
“Five years is a relatively short period in which to execute this shift, especially if it is still looking for a partner. I also think it is a fine idea to try and lift itself out of the market melee by positioning itself at a greater price point, but its attracting enough customers purchasing vehicles that again might be the issue, even if the plan is to build far lower volumes. Sometimes Jaguar feels a little like Alfa Romeo (now part of the Stellantis empire) – a lot of people recognize the brand, a lot of people find the cars attractive and appealing, but ultimately they go elsewhere,” Fletcher said.
Can it be different?
“After 2025 I don’t necessarily think that being a EV-only brand will be the huge differentiator it has been for Tesla during the past decade, unless it can bring something hugely different,” Fletcher said.
Dr Dan Coffey, industrial strategy and world car industry expert from Leeds University Business School, said CEO Bollore faces a complex problem, particularly at Jaguar, but doesn’t expect Tata to dispense with it in the short-term, not least because it’s not obvious who would want to buy it.
“I’m not sure how attractive Jaguar is as a stand-alone sell-off. Who would actually want it? BMW seems unlikely, again, while PSA Groupe seemed interested but is now sucked into Stellantis so why would they want more brands. Tata is unlikely to want to sell to China for complex reasons. Having acquired the luxury British brands, selling to China would represent a loss to a national rival. At the moment, it will likely stick with them, or at least wait to see how things stand in the medium term,” Coffey said.
Meanwhile JLR will try and make sure they try and sell Jaguars where it isn’t competing with Land Rover iconic British brands, Coffey said.
“In 5 years, if the business doesn’t turn up it might sell but would be unlikely to sell Jaguar alone. If it sells at all, it would be together. We’ll have to wait and see how the markets look after Coronavirus is settled. Tata is very serious and not prone to short-term thinking,” Coffey said.
Too small to survive?
Professor Stefan Bratzel, director of the Center of Automotive Management (CAM) in Germany thinks the future for Jaguar and Land Rover looks bleak.
“It’s a radical approach and I think both Jaguar and Land Rover are going in the right direction with electromobility but JLR seems to be too small to survive,” Bratzel said.
Bratzel wondered how JLR could be competitive in the electric world compared with the much bigger BMW and Mercedes, while VW has shown the way with its common electric car engineering spread over many brands and models.
“I think Jaguar will have to look at finding a cooperation partner outside of Tata because JLR and Tata don’t share much. This will be hard in the next few years. It will be hard (for JLR) to remain independent in such an environment. JLR needs a big volume partner. One thought though, JLR maybe could be a partner for Apple or Google. They are very interested in premium vehicles, but Apple would want its own brand on the car,” Bratzel said.
Cash-rich high-technology companies have been about to enter the traditional car market for years now and blind-side the incumbents, but we still await definitive news on this.
Bratzel reckoned Chinese companies like SAIC or BYD might be interested in JLR, following in the Geely/Volvo footsteps. But in his opinion, the future looks uncertain.
“I really see dark clouds on the horizon for the next 5 years. A lot of money is needed for JLR and to turn Jaguar around and I think at the end of the 5-year period the situation will be even worse than today for Jaguar,” Bratzel said.
Leeds University Business School’s Coffey is a bit more optimistic.
“I really don’t know where JLR will be in 5-year’s time, and I suspect Tata doesn’t either. They have a strategy and they’ll commit to that and they’ll judge how things look in 5-year’s time. It’s impossible to predict. It’s any one’s guess,” Coffey said.