New turnaround plan has shifted JLR’s business thinking away from volume after last year’s £3.6bn loss
Mark Tisshaw
28 October 2019

Jaguar Land Rover (JLR) is now focused on delivering more sustainable growth and profits rather than chasing volume, according to chief commercial officer Felix Bräutigam.

Falling sales in China and the impact of the likes of Brexit and the drop in demand for diesel caused JLR to announce a £2.5 billion turnaround plan a year ago. Called Charge and Accelerate, the plan has completely changed the way the company operates.

The move followed almost a decade of record volume growth (sales in 2017 exceeded 600,000, more than treble 2009’s total, and were spearheaded in recent years by growth in China) and that helped fuel profits, which topped £2bn in 2015.

But at the end of the 2018/19 fiscal year, that had turned into a £3.6bn loss (including a £3.1bn write-down in assets, centred on diesel) so dramatic had the JLR decline been. And the positive progress is continuing, with the firm posting a £156 million pre-tax profit in the most recent financial quarter.

JLR CEO Ralf Speth said at the recent Frankfurt motor show that the Charge and Accelerate plan is on track and “going very well”. He said: “We’re ahead of targets so we will achieve them.”

He added that each investment decision is still a process of “turning a stone three times” to check it is right but the “right products” have had investment protected. That process meant temporary factory shutdowns in response to falling demand and cutting 4500 jobs. But it has also refocused how the company does business.

When asked about sales targets for the reborn Land Rover Defender, Bräutigam said more broadly that volume is not something JLR now judges itself on.

Find an Autocar car review

Driven this week

“We don’t want to be driven by volume. It’s not the measure of success for a premium brand,” he said. “We want to build great cars and make money, not just shift units. “It’s more about profit, delivering that and having a sustainable business model. Not just business profits, but added value for the brand as well as the company.”

JLR was hit particularly hard by falling sales in China. Its sales fell 22% there in 2018. Sales of premium rivals BMW, Mercedes-Benz and Audi rose in China in 2018, with JLR’s drop put down to quality issues and an unruly dealer network.

Protesters complaining about the quality of their cars have been a regular feature at JLR’s Shanghai HQ and it’s understood that JLR is awash with models on airfields in the UK that had been destined for China but can’t be sold there due to quality reasons, although no one in the company will confirm this.

However, Bräutigam said there are now the “green shoots” of a recovery in China – a claim backed up by sales in the country rising 24.3% year-on-year between July and September this year.

He said: “We worked intensively with the retailers. There was room for improvement to get them on the highest level.”

He added that JLR will no longer discount models in China. “China is now focused on price, and being aggressive on price,” he said, adding that JLR will not join the price war breaking out.

“What we do right and wrong now will influence us in China for the next 15-20 years,” he said. “I feel we’re gaining traction and getting better in sync to the market, but it’s still declining [as a whole] and facing headwinds on a macro level. It’d be nice if we had a tailwind but it’s a tough environment. We got on the treadmill, got leaner and Charge and Accelerate got us fitter and on a good path.”

Although Bräutigam said there is still plenty of room for China to grow again (“In a country of 1.4bn people, there are roughly 150 cars per 1000 people. It’s 800-900 per 1000 in the US and 500-600 per 1000 in Europe”), it will also be the most competitively and aggressively fought market.

“We could fight for market share at a cost, but we could instead entice people into some niches, and then not discount, and say that’s the price,” he said.

The company has protected investment in product development and, to that end, is instead committed to developing more electric cars. An all-electric Jaguar XJ will join the I-Pace next year, with a sibling model for the Range Rover line-up following hot on the XJ’s heels as Land Rover’s first electric car.

The huge investments needed in electric cars are enough for many car makers much larger than JLR to pool resources in order to be able to develop them, most notably Volkswagen and Ford. JLR has itself teamed up with BMW to develop electric drive units rather than models.

Electric cars, then, are where JLR’s product investments will lie for the foreseeable future. However, JLR still believes it can make money from electric cars in the short term. “We don’t do hobby projects,” said Bräutigam, when asked if the I-Pace makes money. “Every car has to make money.”

READ MORE

New 2021 Range Rover spotted with BMW V8 engine

Jaguar Land Rover opens giant Advanced Production Creation Centre 

Jaguar Land Rover's survival bid: Five new cars in two years

Join the debate

Comments
16

28 October 2019

Good to see JLRback in profit again, hopefully this will safeguard UK jobs. If they can get their EV strategy right over the few years this should help them in the long term. Fully electric Evoque and XJ can't come soon enough....

FM8

28 October 2019
The Dr wrote:

Good to see JLRback in profit again, hopefully this will safeguard UK jobs. If they can get their EV strategy right over the few years this should help them in the long term. Fully electric Evoque and XJ can't come soon enough....

Unfortunately I think their EV strategy is the least of their worries. There entire model and platform strategy is a disaster.

28 October 2019
FM8 wrote:
The Dr wrote:

 

Unfortunately I think their EV strategy is the least of their worries. There entire model and platform strategy is a disaster.

 

Why? Maybe you could elaborate?

28 October 2019
FM8 wrote:
The Dr wrote:

Good to see JLRback in profit again, hopefully this will safeguard UK jobs. If they can get their EV strategy right over the few years this should help them in the long term. Fully electric Evoque and XJ can't come soon enough....

Unfortunately I think their EV strategy is the least of their worries. There entire model and platform strategy is a disaster.

 

 

What rubbish you spout, as usual - the platform they now use is expandable and will cover eventually all models that needs to be, the DS and Evoque have already been moved over, the model strategy, they have saloon cars, which are again selling well, they have SUV's which ARE the best in the world, they have Electric Cars, and they have an expanding sports car market, the XF, F-Pace, E-Pace, F-Type are all having big changes next year, there WILL be a new SUV the J-Pace and that will cover over into the l.uxury market with a RR Version, there is going to be a new baby RR/Discovery which is why Evoque was moved up in size in part.The Rst of the range all now make money, states it above, so you daft quote holds no water whatsover, no other brand has invested to the extreme JLR Has for its size, they are in a postion that will see them good for the next two decades, the all new products which are a significant amount, WILL all be capable and sell well, we even have the Freelander coming back, oh yes, and a large number of derivatives of Defender, and this car makes serious inroads to profits, which after all is the point, of a company, to make money.

28 October 2019
jonboy4969 wrote:

FM8 wrote:
The Dr wrote:

Good to see JLRback in profit again, hopefully this will safeguard UK jobs. If they can get their EV strategy right over the few years this should help them in the long term. Fully electric Evoque and XJ can't come soon enough....

Unfortunately I think their EV strategy is the least of their worries. There entire model and platform strategy is a disaster.

You are so thick. Don't cry. They are rubbish, you will realise one day.

 

 

What rubbish you spout, as usual - the platform they now use is expandable and will cover eventually all models that needs to be, the DS and Evoque have already been moved over, the model strategy, they have saloon cars, which are again selling well, they have SUV's which ARE the best in the world, they have Electric Cars, and they have an expanding sports car market, the XF, F-Pace, E-Pace, F-Type are all having big changes next year, there WILL be a new SUV the J-Pace and that will cover over into the l.uxury market with a RR Version, there is going to be a new baby RR/Discovery which is why Evoque was moved up in size in part.The Rst of the range all now make money, states it above, so you daft quote holds no water whatsover, no other brand has invested to the extreme JLR Has for its size, they are in a postion that will see them good for the next two decades, the all new products which are a significant amount, WILL all be capable and sell well, we even have the Freelander coming back, oh yes, and a large number of derivatives of Defender, and this car makes serious inroads to profits, which after all is the point, of a company, to make money.

28 October 2019

Same regurgitated article as last week? Oh well same answer - where are all the glass-half-full folk who blamed losses on Brexit? Where's Mike Hawes and Co.?

I thought those factory shutdowns were due to Brexit and unncertainties and certainly NOT part of the annual shutdown process which had simply had it dates altered?

Amazing isn't it - another article where things are looking positive and the word 'Brexit' is excluded.

28 October 2019
Brexit was in the second paragraph, but I get what you mean. The vast majority of jlrs woes were down to issues in china, which they have now addressed, things are starting to look better, which is great news.

28 October 2019

Prduct profitability doesn't swing between such extremes, only accounting does and when it does by this degree, numbers cease to mean anything. Remember that JLR is a subsiduary of Tata Motors, itself a subsiduary of Tata Group. JLR's public 'numbers' can show anything they want; only the UK tax calculation would be interesting and they won't publish that.

To understand JLR's health look to the claim that sales numbers don't matter, profits do? Well, every car manufacturer in the world has to deal with very high R&D and fixed manufacturing costs. These costs only 'work' when spread over volume. Either JLR is different to everyone else or they are peddling BS. 

28 October 2019
James Dene wrote:

Prduct profitability doesn't swing between such extremes, only accounting does and when it does by this degree, numbers cease to mean anything. Remember that JLR is a subsiduary of Tata Motors, itself a subsiduary of Tata Group. JLR's public 'numbers' can show anything they want; only the UK tax calculation would be interesting and they won't publish that.

To understand JLR's health look to the claim that sales numbers don't matter, profits do? Well, every car manufacturer in the world has to deal with very high R&D and fixed manufacturing costs. These costs only 'work' when spread over volume. Either JLR is different to everyone else or they are peddling BS. 

You don't turn around figures like that in that short time period without a bit of accounting fairy dust.

D-B

28 October 2019

£160m profit you say? Have we scratched beneath the surface at all? Some £50m is due to lower depreciation, often a bit contentious, a big chunk is due to FX valuations. Investment is down by some £150m, spend less today, but what's the impact tomorrow? Inventory levels are also down, that's good because it means less cash tied up, but all it does in profit terms is shift it around time-wise. And the two big elephants in the room: at this point last year JLR was sitting on a loss of £311m, this is year it's sitting on a loss of £302m, that's 'back in profit'? Secondly, as anyone will tell you, a quarter does not a year make.

Pages

Add your comment

Log in or register to post comments

Find an Autocar car review

Driven this week