In less than two years with its new owner Tata Motors, the iconic Jaguar Land Rover (JLR) franchise is back on track. Strict cost-cutting measures, better management of resources and the launch of a couple of new models appear to have done the trick. If all goes well, JLR could post a big profit by early 2011. The Tata Motors management is elated with the sales in the three months to December 2009. ?This is JLR?s second successive quarter-over-quarter financial improvement. Retail sales, in some markets, notably the UK and China, have increased and moreover, the cost-efficiency measures will contribute to the numbers,? said a spokesperson.
The introduction of Land Rover?s new 10MY vehicles and the new Jaguar XJ are expected to help keep the trend going. JLR announced its new business strategy in September last year, outlining plans to make its fleet of products more fuel efficient, trimming cost and shutting one of its plants in West Midlands by 2014. What?s helping Tata Motors is that demand for JLR?s brands is on the rise?in 2009, the company had said that its manufacturing capacity utilisation was at less than 60% due to a 25-30% drop in demand.
In the September 2009 quarter, JLR posted profits of ?41 million or Rs 313 crore as against a loss, before tax, of ?62 million or Rs 496 crore for the June 2009 quarter. That was after cost-cuts and dealer volume growth of 23% (around 11,800 cars) over the three months to September 2008. Between April 2009 and now, at 136,978 units, JLR?s sales are, no doubt, lower by 26% year-on-year.
But the firm?s big markets?the UK, the US, China, Italy and Russia?are seeing a rebound in demand. In December 2009, for instance, 21,134 vehicles were sold, a smart 33% jump over December 2008. And it?s getting better every month; sales in December improved by 12% over November 2009. It?s the Land Rover that seems to be doing really well with sales up a smart 45% in December over November. And that?s the result of some refurbishing, newly-fitted fuel efficient engines and better styles. Explains Eric Wallbank, director, automotive, Ernst & Young in the UK: ?Along with the rest of the industry, both brands suffered from the economic downturn that hit their core markets not long after the acquisition by Tata. Subsequently, launches of new and revised products, coupled with cost reduction efforts in the company, have returned the business to profitability.?
The Jaguar, however, is lagging possibly because the X-type model has been discontinued. This model derived from the Ford platform was relatively cheap and helped Jaguar sell its best volumes between 2002 and 2004. Between 2007 and 2009, sales of JLR have fallen by over a third. ?For the Jaguar, the difficult market has come at a particularly bad time because it would have been looking for a greater boost from the XF when it was launched,? says Jonathon Poskitt, European sales forecast manager, JD Power Automotive Forecasting in the UK, adding that JLR needs to diversify its product line-up to cater to the smaller car segment.
The LRX, a smaller SUV from Land Rover going into production next year, will be the first model to help achieve this. Before 2008, Jaguar Land Rover had, on average, been achieving a strong 2,50,000-plus units per year and the Jaguar XJ saloon and the Range Rover LRX should help restore the company?s position, says Poskitt. According to him, the key regions to focus on are western Europe and North America.
In western Europe, while car markets generally were helped in 2009 by the scrapping of incentives, the larger, more expensive vehicles didn?t do too well. Tapping into the market in China would be an obvious way to boost global sales. The good news is that demand in the UK is picking up and the days of discounting are gone. And that should help the relatively small and cheap Freelander 2 as also some of the others like the Rover 2010 and Range Rover Sports.
Further, the UK government?s move to boost sales by reducing temporarily value-added tax (VAT) on certain cars from 17.5% to 15% has helped push up demand in the past few months. There may be some bumps ahead, but they will be few and far between.