Many readers are familiar with the Jaguar and Land Rover marques, but few know their complicated history. In the 1930s and 1940s, about when both were founded, they were independent companies. Jaguar produces iconic luxury vehicles and sports cars, while Land Rover built rugged off-road vehicles and later, what we call today SUVs.
The companies first came together in 1968 as part of the British Leyland conglomerate. After the collapse of British Leyland, the companies split again and became independent from each other. Next, they became subsidiaries of larger carmakers. In 1994, BMW purchased Land Rover following the break-up of the former Rover Group. Ford then acquired Land Rover from BMW in 2000. Later in 2003, Ford Motor Company bought luxury carmaker, Jaguar.
In 2008, Tata Motors, and Indian manufacturing chaebol purchased both companies from Ford. In 2013, the operations of Jaguar Cars Limited and Land Rover were merged into Jaguar Land Rover (JLR). Both companies have had a complicated history of mergers and acquisitions.
With substantial financial backing from Tata, it seemed JLR was set to revive its brands into top position once again. And in the beginning, they did just that. To capture a broader market, JLR started production at a joint venture with China’s Chery Automobile in the eastern Chinese city of Changshu in 2014. By producing cars locally, it allowed JLR to modify vehicle interiors and exteriors to local preferences providing the manufacturer with a key selling point. It also meant that buyers could avoid the stiff 25 per cent tariff that the Chinese government levied on imported vehicles.
From 2015 to 2017, JLR made five locally assembled products in its new Chinese production facilities: The Land Rover Evoque and Discovery, and the Jaguar XFL, XEL, and E-Pace. As a result, JLR’s China sales went from 92,474 cars in 2015 to remarkable 146,399 vehicles in 2017. JLR was now on the fast track to success. Land Rover’s Evoque and Jaguar’s very successful crossover SUV, the E-Pace, made up the bulk of new sales.
Sadly, because of a host of quality control issues that plagued the assembly lines, the number of defects reported by car buyers increased. What had upset JLR’s business in China most are the persistent twin woes of reliability and dependability. Unfortunately, manufacturing in China is not always synonymous with high quality, as JLR discovered first hand.
Oddly enough, JLR has never shipped vehicles from the US to China to shore up its business. Trade differences and the Trump administration’s insistence on a “level playing field” have all made this all but impossible. And the whopping 25 per cent import duty is a non-starter and effectively kills imports.
While Chinese assembly problems persisted, it’s important to remember that JLR product quality has long been an issue with Jaguar and Land Rover even when they were in the hands of Ford. The US automaker did make improvements to the companies by giving the cars basic platforms. Ford also had economies of scale that helped tremendously in improving quality. One example is that Jaguar used the parts of Ford’s Panther platform to build a new Jaguars, which proved very successful. Jaguar also dumped unreliable Lucas electronics and used more reliable Ford products for the production of their vehicles.
Still, according to J.D. Power and Associates, Jaguar and Land Rover routinely rank well below the industry average for new and three-year-old vehicle quality and dependability in China. To demonstrate the point, Jaguar Land Rover announced 13 recalls in China for defects with components ranging from power plants, instrumentation, batteries, and airbags in 2017. The recalls covered some 106,000 vehicles. That works out to be more than 70 per cent of its local sales during that year.
Since August 2018, Jaguar and Land Rover owners have regularly protested in front of JLR’s China headquarters in Shanghai to bring attention to widespread quality problems they allege with their cars and SUVs.
To add to JLR’s woes, a sudden shift from petrol and diesel engines to battery-powered vehicles also caught the company somewhat off guard. The company also needed to roll out more electrified vehicles to meet new Chinese regulatory standards. The switchover would prove costly. This highlights the difficulties that a low-volume car faces when taking on high-volume car manufactures like Toyota and Honda.
Another factor that is causing problems is that JLR’s dealer network in China is, in reality, a work in progress. The company says only 18 per cent of its dealers are in major cities like Shanghai and Beijing, with more than a third of them having only been open for three years or less.
In the year ended March 2019, JLR lost US$4.6 billion. However, the carmaker saw the writing on the wall and dramatically improved product quality and launched new models that led to an impressive recovery in its third quarter as it turned a loss into a profit. Revenues in the last quarter of 2019 rose 2.8 per cent to 6.4 billion pounds (US$8 billion). JLR said sales in China, which had been the primary cause of losses, improved by 24.3 per cent. Sales of the Range Rover Evoque and Jaguar E-Pace compact SUVs rose 30 per cent.
“The improvement reflected a combination of the higher China volume, stronger product mix, lower operating costs, and favorable foreign exchange. Margins also turned positive year-on-year with an EBIT (earnings before interest and tax) margin of 3.3 per cent,” JLR said in a statement.
As JLR moves to solve its uphill battle with costs and improve quality, it has joined with BMW to develop next-generation electric-vehicle technology. The move intends to share the cost of research and development of new motors and battery technologies. This kind of joint venture is not uncommon in the car industry. For instance, Lotus Cars’ electric vehicles used electronics and batteries purchased from Tesla Motors.
“We’ve proven that we can build world-beating electric cars, but now we need to scale the technology to support the next generation of Jaguar and Land Rover products,” Nick Rogers, JLR technology chief, said recently in a statement.
Land Rover is the bigger of JLR’s two brands, with 398,717 cars sold last year. Jaguar’s, on the other hand, sold about half that amount or 180,198 vehicles. Even with lower sales, Jaguar has historically delivered the biggest share of profits.
JLR’s future seemed to be turning a corner in 2019. However, with the COVID-19 outbreak, it has seen this success put on hold. It’s not only JLR that’s facing the daunting problems the virus has caused, but other manufacturers, as well. Even JLR’s former owner, Ford, is in trouble. The company expects a $600 million loss in first-quarter of 2020 over the ongoing disruptions from the coronavirus pandemic. As carmakers slowly drive themselves out of the Corona quagmire, we can expect that there will be winners and losers. What the landscape will look like post-COVID-19 we can only guess.
-ADiN.jpg&w=347&h=240&crop-to-fit)
.jpg)
.jpg&w=500&h=550&crop-to-fit)
Back
