From the BBC:
Sales of Jaguar Land Rover cars have fallen sharply, taking the firm into a loss for the three months to the end of September.
The firm blamed lower sales in China for the decline, as well as uncertainty in Europe over diesel and Brexit. Jaguar made a pre-tax loss of £90m for the quarter, compared to a profit for the same period a year ago.
Car makers have high fixed costs and fairly low marginal costs, so they have to make up their minds which strategy to adopt:
a) Be a mass manufacturer. You make as many cars as possible to reduce fixed costs per car, enabling you to stay price competitive.
You even out good and not-so-good years by tweaking your finance deals and 'special offers' so that you can shift the same number of new cars for the same official list price each year.
In the really bad years, the shit hits the fan... but you might be big enough to be able to haggle for government bail outs. Or you make losses for years or even decades on end (like Vauxhall/Opel)
b) Be a niche/luxury car maker. Do like Morgan, and deliberately only make half as many cars as you could sell.
That enables you to either charge higher prices in good years; or charge lower prices and have the luxury of a waiting list, taking non-refundable deposits for a place on the waiting list to smooth cash flows.
If you're only making half as many cars as you could sell in good years and demand falls by half in bad years, so what? You can still sell every unit you actually make.
Dribbling them onto the market is also good for second-hand resale values, which in turn feeds demand for new cars in a virtuous circle.
----------------
Summary: Jaguar-Land Rover has messed up, it can't decide whether to be a niche/luxury car maker or a mass manufacturer and has got the worst of both worlds.
----------------
Update: Sobers makes the same point in the comments, but from the point of view of the consumer.
Wednesday, 31 October 2018
"Jaguar Land Rover makes loss as sales slide 13%"
Subscribe to:
Post Comments (Atom)
16 comments:
True.
But, pretty well every other car manufacturer makes losses a lot of the time - it's one of the chief reasons why Warren Buffet says he won't invest in them.
And if you look at JLR they have also been hit by the ludicrous 'luxury car tax' (government fail), 'diesel tax' (government fail) and high VAT (government fail). As have other manufacturers.
Jag tho' is especially vulnerable IMHO.
L, true, they've been unlucky with government meddling recently. But they shoush have reckoned with that and I'm sure that Morgan will weather the same storm.
JLR vehicles are also terribly unreliable. At the bottom of the reliability surveys consistently. The dealerships are also sh*t at customer service, mainly because they're getting so many warranty claims and having to try and thin them out a bit, thus p***ing off customers. You don't buy a mega expensive vehicle and expect to have it on a low loader all the time because the engine has blown up (one of their major problems is the 3.0l V6 diesel engine in the Discoveries, there is a known problem with crankshaft bearings that can rotate and cut off oil lubrication, causing total engine failure are relatively low mileages, yet JLR wont accept responsibility).
The other main problem with JLR is they've spread their brand too thinly, especially on the Land Rover side. There used to be 3 LRs - the rough tough up a mountain, across a desert, used by the British Army, Defender, the core vehicle that has a direct engineering link to the original Series 1 LR that started it all, the Range Rover for the nobs, and the Disco for the well to do middle classes. All of which had the same 4x4 credentials, and upper end brand image, and were capable of proper off road performance, even if they never left Surrey tarmac. JLR then started to use the brand to sell lesser engineered vehicles that were basically cars - the Freelander, the Evoke and the Disco Sport. Which were sold at lower prices and made the brand available to the masses - you can drive a 'Range Rover' Evoke for £300/month on a lease. All of which has meant the brand has been devalued by the cheap versions being everywhere. Why spend a fortune on a RR or Disco when Joe Public can drive around in the same brand for half the price?
To put the tin lid on they then end production of the vehicle that the entire 4x4 brand is based on, the Defender, and have no replacement for it at all. So now the brand has no genuine off road performance underpinning, its just free floating on no reality at all. And people have cottoned on I think and are have realised the emperor has no clothes......
S, yes, fair comments. They have managed to hit the worst of both worlds.
sobers. LR has been spectacularly profitable for a long time. It carried Austin Rover for years and was raped of its profits and starved of investment. Latterly it introduced the Freelander to complement the three prong range you describe. The Freelander became one of the largest selling small SUV's in Europe. The Disco Sport is the freelanders replacement, and is a very good vehicle. I have one and it's done 30,000 faultless miles.
What they have done is to stretch the brand values too far with the likes of the Velar which is basically chasing the style conscious buyers that buy Audi Q range and so on.
BTW my Disco Sport has really impressive off road capability and tows brilliantly (Oh and I drove a Defender 110 for about 13 years as my daily driver).
But what JLR really has is a problem with Jag. I was pondering this and I think that they have not made the brand 'cool' enough. How can do they do this? How do they get younger buyers to think of the cars as aspirational and cool? Has it been too long since Jag was a byword for 'grace, space and pace'? Does it need to go back to circuit racing?
As to engine issues I have a mate whose son worked for Tickford who were developing Jag engines. He recognised the problem with the V6 some years ago. But that engine is a development of an old Ford / PSA design. I understand that Jag has a new straight six and three cylinder in development based on the Ingnenium four pot. Maybe that will cure reliability? Also imagine the sound of a petrol straight six in the F Type. Mmmmm
Reverting to your comment on the Defender, I agree. They absolutely have to get its replacement bang on.
(Mrs L has a Jag X Type Estate that has run well for 11 years.)
"LR has been spectacularly profitable for a long time"
Yes, through the years that they made 2, then 3 models. Now they make what 4 or 5 but not the very vehicle that created the brand in the first place, the Defender. Its typical short term British management thinking 'Ooh we're got this wonderful brand that just dropped in our laps, lets squeeze the last bit of short term profit we can out of while starving it of the investment needed to maintain it'
Just like BL/Rover did with the Mini - wonderful brand, did they develop it and introduce a new Mini to replace the original when it got too long in the tooth? Of course not, they binned the entire thing because they didn't want to spend the cash on a new design. Whereas BMW kept the Mini brand and a couple of factories to make it, designed and developed a Mini for the 21st century and made a killing.......JLR is the last bastion of the old British car industry and it shows.
S. Yes. That's what AR did to LR. Took the surplus to prop up everything else and did not invest in LR to keep developing the 'Landrover' i.e. the series vehicles and then the Defender. Also taking out that cash meant that the wonderful Rangerover design was underdeveloped and poorly made.
I think that as they have seen their market being attacked by SUV's made by all and sundry they felt they needed to join in. But IMHO they could have stuck closer to their core values and just focused on building them better.
But the real issue seems to be Jag. Just how do they re-establish its brand values? What does Jag stand for?
Based on numerous trips recently on the M40, I think that Jags are the car of choice for elderly males in check shirts who like to travel at a maximum speed of 64mph in the middle lane
"What does Jag stand for?"
Jags were supposed to be the car the business owner aspired to driving when they 'made it'. It combined the engineering heritage of the race cars with an upmarket quality and image, but with an ever so slightly dodgy tinge (Arthur Daley/bank robbers zooming up the M1 in their Mark 2 leaving the police in their wake). It was a way for someone to say 'I've got money, but I'm not just a boring middle manager from Kettering'.
Jag have done the same thing to their brand as LR have, they've moved it down to the masses, with the X types, which were just Ford Mondeos in disguise. So Mr & Mrs Jones in a bog standard housing estate could have a 'Jag' on the drive, which hardly means there's a great deal of cachet left in having one on the drive of your stately home. And have now also gone for the 'cool' market, which is always fatal to a brand, because cool is very fickle, and also the cool brigade tend not to have the money that the uncool do.
Sobers. So how do Jag get rid of that 'golfists' image (as Clarkson would say) and make it a brand that successful younger people aspire to? (And the remarks you make could equally apply to the BMW 3 Series - but that seems to get it cachet from being the drug dealers vehicle of choice).
S: "Jags were supposed to be the car the business owner aspired to driving when they 'made it'."
Got it and in one! I have fond memories of Julia Dickinson's dad driving me home from school in his XJ6. I thought, I'll buy one of these when I've made it. And get married to Julia Dickinson.
MW. How did that ambition work out then...?
Mrs L had a similar experience. Her mates rich dad used to take them to school in his Jaaag. And she always wanted one.
L, I never got married to Julia Dickinson :-(
Also, Jags now have the image that Graeme mentions above, so I've lost interest. I'm old, but not ancient.
MW. Precisely re Jaaags. They have got to sort their 'image'. But how? I reckon they've got to start racing the road cars again for a start. I well remember MKII's being given the beans in saloon car racing in the 50's and 60's. https://vintageracecar.com/hrdcs-2017-coombs-jaguar-challenge/
I'm a business owner (have been for years) - I always found the Jaaag brand to be a bit too 'double breasted' - another Clarksonism I think.
But... same for Bimmers, Audis and Mercs - any fule can have one on PCP if they've got £250 per month to spend - if I'm going to spend many 'large' on a motor I don't want some spotty dickhead in a hatchback with the same badge as me.
So a Maserati Quattroporte it would have to be, if I ever do actually 'make it'.
Shiney. The XJ might fit your bill. It's better than the Masser IMHO.
Post a Comment