Jaguar Land Rover (JLR) recently revealed a £3.6 billion annual loss, much of which was due to it reducing the value of company assets and a recognition of a reduction in future earnings.
The results came after two weeks of speculation that the PSA Group – owner of Peugeot, Citroën, DS and Vauxhall/Opel – had made a bid to buy JLR from Indian owner Tata.
A ‘post-integration’ document was reported to have been in circulation at the British car maker. JLR boss Ralf Speth did not rule out discussions between PSA and Tata but suggested he was not party to them. For its part, Tata said there was no truth in the rumours that it was about to “divest its stake in JLR”.
What Tata’s statement didn’t say was that it might divest some of its stake in JLR, entering a co-operation with PSA that could make sense for both companies. This currently looks to be the most likely outcome, according to Autocar sources.
One investor said he believed that some kind of PSA-JLR tie-up was “inevitable”, a sentiment backed up by former Land Rover chief engineer Charles Tennant, who told the Coventry Telegraph that JLR was in a “death spiral”.
So is JLR really in trouble, or is this major bump in the road simply due to the collapse of JLR’s sales in China? The hard figures suggest that there is trouble ahead.
According to JLR’s accounts for 2018-19, sales in North America were up by 8.1% to 139,800 and up in the UK by 8.7% to 117,900 units. But sales across the EU were down by 4.5% and they crashed in China by 34%. North America is now JLR’s biggest market.
Behind those headline figures, there were big drops in the 2018-19 sales of the Evoque and Discovery Sport (both down by around 30%) as buyers waited for the new models, but this should spring back over the next 12 months. A 20% fall in Jaguar F-Pace sales is not helpful for a comparatively young model, though.
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Anyway, hopefully the worst is behind JLR. I agree Jaguar should probably combine XE and XF into one model. Maybe like the extra long-wheelbase XE they use in China, which still has great proportions but offers tons of rear legroom. Lots of rear legroom is definitely a luxury and would make it very unique as a global product instead of just a China specific variant. Then maybe only raise the price a few thousand £/$ and then just move way up to the much larger XJ if buyers want much more in a sedan.
Regarding USA and UK trade relations, the USA / Trump Administration view the UK as very close friends, almost like family, and they have already said several times they’re just waiting for Brexit to happen and plan a phenomenal trade deal as soon as the UK is independent. So North America is JLRs biggest market and the UK could have the best trade deal of any nation with the USA.
Also, a bit off topic, regarding electric vehicles, the upcoming Porsche Taycan interior is so small and cramped inside. How can it compete with the Tesla Model S - SEE: https://m.youtube.com/watch?v=O2s68co4Xw8
mark2autoz wrote:
You raise some interesting and valid points but I’m afraid the worst is just beginning for JLR (not nearly over) and their outgoing finance boss has already admitted they expect another loss for the next quarter, which is poor, especially as they’ve just borrowed hundreds of millions against unsold stock to make the last quarter look more rosy than it really was
All credit to Tata for their
All credit to Tata for their heavy investment in JLR but unfortunately they did not see the double whammy of the aftermath of dieselgate and the collapse of their Chinese sales. I think they have also been a bit cavalier tackling their long term quality inadequacies - probably thinking it was down to poor design and engineering which would be resolved as new models came on stream whereas it may be a more fundamental problem. JLR’s hugely ambiguous new model programme may perhaps have diverted resources away from a need for relentless focus on quality and increment manufacturing improvements. In my opinion, even in the premium auto market JLR are too small to go it alone because even if they pull themselves out of their current predicament they could in future be hit by other headwinds such as higher tariffs on exports to the US. I think Tata and India have too much of their prestige tied up one JLR so I cannot see a full sale to PSA but their must be scope for substantial cooperation especially platforms and engine sharing with the next generation of Discovery Sport and Evoke. That said it could be argued that a collaborative agreement with Geely may be a better fit. However that may not be possible because Geely have a large minority interest in Daimler - Mercedes-Benz parent company. I cannot help but think JLR have too many product lines with overlap between the brands - where does the Velar really fit and once the new Defender is launched the Discovery will Bev sandwiched between it and the Range Rover Sport. Perhaps the next XF should just be an extended wheelbase XE or a shortened XJ. Despite their best efforts Jaguar are always going to be also runs against the mite of the 3 Series, C Class and A4. I think the time has come for a bit of realism by JLR and Tata.
Meh
mark2autoz wrote:
I agree. I also think PSA could get in big trouble very quickly. It has very little going on with electric cars. Some people on here suggest JLR are late to the party (which isn’t true) but PSA are still trying to find out where the party is and if they have an invite. Quite genuinely Tata could by buying PSA itself within a few years as the group slides into trouble with ancient German car plants, lack of electrification, battery manufacturing facilities, etc. JLR have taken the investment hit already.
But JLR have made very poor investment decisions hence having to write off a third of their asset value and Tata Motors are already $14 Billion in debt and their home market in India has just crashed so eventually the money will just run out
CharlieBrown wrote:
Tata Motors is part of Tata Group so you kind of need to look at the wider picture. JLRs write downs are mostly to do with The Jaguar XE and XF selling badly. Land Rover is performing strongly as are Jaguars SUVs.
The write downs now mean that they won’t have to take them later. Tata Motors has just launched several new models amongst them the Land Rover based Harrier which if Autocar covered is gearing up to enter the European market and looks like it will give Kia a good run for its money. But whose dealers will Tata need to use? My guess Land Rovers.
I’m not saying JLR shouldn’t want to merge with another car maker but PSA is the weakest big car maker it could merge with.
TStag wrote:
Ok fair enough let’s look at the bigger picture where the Tata Group has debts of $40 Billion