Jaguar Land Rover in serious turmoil
Jaguar Land Rover (JLR) has serious problems. In the third quarter of its 2018/2019 fiscal year it lost 3,8 billion euro because it executed also a depreciation of 3,1 billion euro. Even without this depreciation there is still a loss of 305 billion euro in that 3rd quarter and 700 billion for the first 3 quarters.
Mother company Tata regressed up to 30% on the Mumbai stock exchange and lost 7,9% of its value in one day last Friday. The instigator of this was the bad news about JLR.
Since JLR was taken over in 2008 from Ford by the Indian Tata Group, it was a real success story. In 10 years, sales tripled to more than 600.000 cars, the revenue quadrupled to 29 billion euro and the net benefit went from 27 million to 1,67 billion euro.
To achieve this, Tata has invested a lot, enlarging the portfolio of both brands, building factories, investing heavily in R&D and personnel. Everything went extremely well, until this last year.
For the first 3 quarters of the last fiscal year, JLR sales have slowed down by 21,6% to 420.000 cars, the turnover regressed by 6,3%. The biggest problem is China: a 35% drop in sales for the same period. Main reasons, according to JLR, are inappropriate distribution channels and the US-China trade war.
In Europe JLR noticed 5,8% less sales, mainly because it is strongly dependent of diesel engines and they have had a serious blow in Europe last year. The fact that it has launched a totally new electric car (Jaguar I-Pace) and proposes some hybrids (Land Rover) hasn’t been able to compensate for this.
In Belgium, sales have resisted until now. In 2018 Land Rover sales grew 4,9% and those of Jaguar were even 20,6% up. This year sales are slowing down, but not more than those of the general market, so Belgium stays atypical as far as sales are concerned.
Additional problem: Brexit
At JLR they are also very concerned about Brexit, especially one with ‘no deal’. JLR has already decided to close factories from 8 to 12 of April. Last year already CEO Ralf Speth announced that investments in the UK would strongly diminish because of Brexit. A no deal Brexit would cost JLR 1,2 billion euro a year.
There was also the recent announcement that the production of the Discovery SUV would move from the UK to Slovakia, where a brand new plant has been built. Last month JLR has also officially announced that it will scrap 4.500 jobs, more than 10% of total employment.
To save the company serious investments are needed. JLR will try to offer electrification (full electric or hybrid) in all of its models by the end of 2020 and has announced that the investments will reach more than 16,5 billion euro in 3 years.
Everybody is waiting for a reaction of mother company Tata now. The company has already reduced its objectives on the operational margin for 2018/2019. Where it had predicted stability earlier on, the financial director of Tata, PB Balaji, now talks about a “marginally negative” perspective.