Motoring expert Charles Tennant has given his blunt take on car giant Jaguar Land Rover’s future following a challenging period for the firm – and criticised much of the way the firm has been run. Last year, the company’s CEO Thierry Bolloré stepped down and Dr Tennant had his say on what it meant for the company in the near term.
Three months after that news, he has looked at what the future holds under new leadership and following a downsizing of operations in 2019 at the Solihull manufacturer. And he has some sharp words for the carmaker – saying it is a ‘minnow’ compared to BMW and Mercedes in terms of sales and profits.
He stressed there are “very bright spots” at the firm – including the Range Rover and Range Rover Sport and the new Defender. But he said JLR’s bosses had shown “hubris” during challenging times, and had “stumbled” on vehicle electrification. Indeed, he said the firm had “lost ground” in this area compared to competitors such as BMW, Porsche, Audi and Tesla.
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He said: “Jaguar Land Rover (JLR) gave up chasing sales volumes to take on BMW, Audi and Mercedes Benz when it found itself in a kind of no-man’s land – neither one thing nor another – where it was geared for high sales of one million per annum that it could not deliver, but repurposing the company to a lower volume base was going to be painful.
“After heavy losses in 2019 it took the difficult but correct decision to downsize with massive job losses and a huge £5 billion cost saving programme. Its Reimagine strategy of luxury by design announced in 2021 declared that it will indeed go for lower volume high margin market sectors, typically enjoyed by cars such as the Range Rover and Range Rover Sport, and more recently the new Defender.
“It seems that small cars make small profits. Today the downsized JLR is a minnow compared to BMW or Mercedes Benz in terms of sales and profits. JLR sold 330,781 cars in 2022 (20% down on 2021) whilst BMW and Mercedes Benz were each above 2 million.
“JLR have significantly reduced their breakeven point from 600,000 to below 400,000 by cost saving and price rises – a legacy of previous CEO Thierry Bollore’s Reimagine strategy, which is still being followed by interim CEO Adrian Mardell after Bollore abruptly left the company in December after only two years in the corner office. JLR were still losing money whereas competitors (with a lot more purchasing clout) were posting record profits on lower sales, by managing the semiconductor chip shortage much better through prioritising production on higher profitable cars.
“JLR has since wound back production of its lower demand and less profitable cars such as Jaguar XE, XF, and E & F Pace (which are all now in run-out mode anyway) as well as Range Rover Evoque and Discovery Sport. Instead, the scarce microchip supply has been going to build high margin Range Rover, Range Rover Sport, and Defender vehicles, which are in hot demand and make up most of the order backlog of over 200,000 cars.
“This is beginning to bear fruit as in the December 2022 quarter a profit before tax of £265 million was achieved, although the forecast for the full year 2023 is at best break even due to a £697 million loss accrued in the April to September period as the microchip crisis ravaged the production plans. A problem that JLR needs to deal with now is that it has the most confusing product portfolio of any other manufacturer where similarly sized cars compete with one another within the Land Rover brand and across Jaguar as well.
“For example, if you compare the Range Rover Velar with the Jaguar F Pace or Discovery 5 with Defender or Range Rover Evoque and Discovery Sport you can easily see the potential for sales cannibalisation. Average sales per vehicle line is severely compromised where the only Jaguar car to sell more than 20,000 last year was the F-Pace SUV and at Land Rover only the Defender and Range Rover Evoque sold more than 50,000 each.
“This problem was compounded when JLR brought both brands together at sales outlets known as the Arch concept – in which dealers invested millions of pounds. However, the company does have some very bright spots – Range Rover and Range Rover Sport and the new Defender, which are all in high demand right now and are very profitable.
“The Defender was JLR’s highest selling car last year at 66,805 and it will be interesting to see whether these numbers will grow further and be maintained or will they tail off as pent up demand is satisfied or customer tastes change. One area that JLR have definitely stumbled is on vehicle electrification where after launching the first premium award-winning battery electric car in 2018 – the Jaguar I-Pace – they failed to follow through and have now lost ground with BMW, Porsche, Audi and of course Tesla (who are now producing over one million electric cars per year).
“The Thierry Bollore Reimagine strategy set out in 2021 aimed to address that where Jaguar becomes an all-electric brand starting in 2025 with low volume high price cars that will be stunning to look at (Jaguar are tight lipped as to whether they will be sporty saloons, sports cars, or SUV’s). But this came with a £1 billion price tag as Bollore simultaneously cancelled the electric Jaguar XJ salon and J-Pace SUV which were close to start-of-production.
“Apparently, the cars did not look good enough and were behind on technology. Land Rover will start electrification in 2024 with a battery electric Range Rover model and will be fully electric at the end of the decade, but will still produce combustion engine cars for some markets other than the UK where they will be banned.
“Interestingly, JLR are achieving this with two competing approaches. Jaguar are developing a bespoke in-house platform called Panthera which was surprising as it was thought they would collaborate with another electric vehicle manufacturer. Whereas Land Rover are continuing with their Modular Longitudinal Architecture (MLA) aluminium flexible platform (for Range Rover, Discovery and Defender) and Electrified Modular Architecture (EMA) platform (for Range Rover Evoque and Discovery Sport).
“So all future Jaguars will all ride on a no compromise dedicated battery electric platform whereas Land Rovers will be flexible so as to house combustion engines, hybrid and battery electric propulsion. And the flexible approach is a must for Land Rover as they do not have the scale or resources to just build a battery electric factory and wait for the sales to climb – as VW can for Audi and Porsche – and damage the cash cow.
“Whilst the flexible approach will inevitably compromise engineering and manufacturing decisions, you can run all variants down the same line according to customer demand. For JLR going to three platforms from seven is no mean feat and these things do take time – it is almost like a cruise liner changing direction.
“However, one question remains unanswered, which is where JLR will source the Lithium-Ion batteries for their electric cars from – either a UK or Spanish gigafactory – and whether they will wholly own and operate the facility or partner up with an existing battery supplier. The location may well depend on the level of government support they receive – they’re asking for £500 million which is about 20% of the required investment.
“Either way surely this is a death blow to the proposed battery gigafactory at Coventry Airport, which needed JLR on board to justify the project. Now everyone is chasing Tesla, who are seemingly years ahead with their technology and it’s not just on batteries, electronics or software according to Toyota – who did a tear down on a Tesla model Y – who have concluded that Tesla have a masterly simplistic vehicle structure, built from advanced manufacturing techniques and machines to produce the huge structural castings that replace many spot welded or bonded sheet metal assemblies.
“Tesla are also using the vehicle battery as a structural element of the vehicle. Toyota have described it as a work of art, which is praise indeed from the masters of quality and production efficiency.
“One thing is for sure that JLR management have demonstrated a lot of hubris during some extremely challenging times for the company as they move forward to their lower volume but potentially profitable future. And Tata Motors seem totally committed to their British jewels in the crown.”
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