According to new financial results filed by Jaguar Land Rover (JLR), its once monumental profit margins have evaporated.
The days of leaping sales and big transaction prices (especially in China) have given way to slowing demand and significant sums have been invested in the new MLA platform, the Jaguar I-Pace and the new Slovakia factory. In the financial year 2017-2018, JLR’s profit margin was just 3.5%.
Jaguar Land Rover posts £264 million first quarter loss
The company says its new MLA platform strategy, significant cost-cutting and a reduction in complexity of future components mean it is getting its costs under control while still investing massively.
As well as adding as many as four new model lines over the next five to six years, JLR will also completely replace its model line-up over just six years, while increasing the complexity and sophistication of its products as global regulation and competition get ever more onerous.
Indeed, between 2019 and 2021, JLR will spend 12-13% of its turnover on research and development. The industry norm is just 5%. But, as one JLR source rightly points out, it is having to do in 10 years what the Germans did across 25 years or more.
So it’s no surprise that JLR thinks, in the medium term, profit margins will be between 4% and 7%, which is below what German premium car makers manage. Long term, JLR is aiming at a relatively modest profit margin target of 7-9%.
But you can’t fault JLR management’s strategy: invest and invest again in new product. It’s what the old British industry never managed to do, which is why it is long gone.
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McGovern and his tedious
And £70k hybrid turbo 4s are very very far from acceptable. Cheap, crude, weak, heavy and course, in no particular order.
That's all good
New powertrains? Let me tell
@ Hilton Holloway
Hilton....nice to see a report from you....I thought you had retired!! I have missed your articles.
I think a combination of iffy decisions at JLR has affected the old business model.
Too much reliance on diesel power being the biggest and the Chinese market which looked like the goose which layed the golden egg for a while probably the next biggest cause and effect.
Strange since the warnings for both were writ loud and clear for a while.
JLR has also been something of a 'brain drain' with countless staff leaving other brands to work for JLR in ever more complex and seemingly duplicated job titles.....I understand this is at an end, so some excess weight likely to be trimmed HR wise.
As a British driver of German SUV's, I would love to be patriotic by supporting JLR with the purchase of one of their offerings, but the, (in my view) 'squashed under a falling bridge' look doesnt float my boat....I place practicality in an SUV ahead of design whims, - call me old fashioned, I dont care!
Also LR reliability on major componentry still causes great concern since I always buy my cars at 2 years old.
Jaguar benefitted from Fords attention to this before they sold PAG, LR obviously stretched Fords abilities too far.
IMO LR would do well to fix this pronto....to date they have had so many orders in the 'bank' that clearly they had a rather cavalier attitude to quality control. Now that the tables have turned, maybe it is time for some reflective contemplation on their customers ownership experience....not least at the frequent deaer workshop visits.
Squashed?
As a driver of British SUVs, I’ve always preferred McGovern’s linear styling to the rather bloated or overstyled alternatives from Germany. But each to his own.
Quality control?
I should add that my Discovery Sport was bought at 18 months old. Haven’t had to visit the dealer for any problems in the years since it was bought. The one issue I do have is the frustrating throttle response and slow witted transmission. Practicality-wise, it beat any rivals at a similar price at the time quite convincingly. But again, each to his own.