Jaguar Land Rover was just beginning to benefit from a mighty cost-cutting restructuring when the crisis began. It was also planning a huge investment in future technology as it geared up for a massive expansion of its electric vehicle line-up.
Analysis firm Fitch predicts that JLR sales will fall by 15-20% this year as a result of the pandemic, having a heavy impact on its cash reserves – which could threaten that future investment. That puts extra importance on JLR finding partners with which it can share future development; it’s already teaming up with BMW on electric powertrains.
Still, JLR’s turnaround plan was well timed: earlier cost-cutting and investment in new models such as the second-generation Range Rover Evoque, new Land Rover Defender and plug-in hybrid variants should pay off as car sales pick up.
The biggest threat to JLR is likely to come from above: its Indian parent firm, Tata Motors, is struggling badly. Its sales had been falling sharply for some time and have now dried up, due to the impact of India’s near-total lockdown. Brokerage firm CLSA recently said Tata Motors has zero value aside from JLR, which accounted for 79% of the group’s turnover in the first quarter of this year.
What about JLR's manufacturing base in Britain?
JLR was back in profit after its £2.5bn cost-saving plan announced last year, which included more than 4500 job losses in the UK. Then the pandemic hit and now it’s in big trouble. It furloughed half its staff and is rumoured to be burning through £1bn per month. And that’s not all: JLR’s chief financial officer has admitted that if the UK “crashes out” of the EU with no deal, it would cost the company £500m per year in tariffs on vehicle exports alone.
Nonetheless, JLR is committed to the UK, as its multimillion investment to retool Castle Bromwich as the company’s flagship plant for EVs proves. JLR’s UK production volume fell by 14.3% in 2019 compared with 2018, the firm building 385,197 cars across its factories in Castle Bromwich, Halewood and Solihull. JLR will want to increase volume in each of those locations to get them nearer capacity, while at the same time expanding its global manufacturing footprint, as demonstrated recently by the opening of a plant in Slovakia to produce the new Defender.
Peter Wells, an industry expert at Cardiff University, says: “I can’t see JLR’s UK plants disappearing. They’re too important to the UK and politically important to the Midlands and the economy.
“JLR does have some constraints: one is a lack of a broader manufacturing footprint. It needs to hit higher production volumes and look at more global plants by finding the right partners. Its future might be similar to Volvo’s: in a small country with a relatively small company, it’s possible to prosper in the automotive world with the right decisions, the right kind of partnerships and a bit of luck.”