Jaguar’s future at risk as owner Tata Motors reflects on JLR’s recovery plan

The future of Jaguar, a British luxury sports sedan, sports car and SUV maker is at stake as its Indian owners, Tata Motors, huddle to decide how the coronavirus-ravaged company, along with its brothers in Land Rover, can survive. and prosper when the dust settles

Tata Motors needs to decide what to do with its JLR subsidiary, which generates losses. JLR lost £ 422 million ($ 525 million) before tax in the year ended March 31, after losing £ 3.6 billion ($ 4.5 billion) in fiscal year 2019. (Jaguar numbers do not They reveal themselves). Therefore, JLR has been in financial trouble for some time, and the consequences of the coronavirus crisis will have led to the need to make existential decisions.

Tata Motors said in mid-June that the action will be decided in a few weeks, so that suggests that the news will come out before August.

Industry experts believe that the Jaguar Land Rover (JLR) Land Rover arm could use some rationalization as it struggles to get out of a self-imposed dead end, but its brand power has allowed great success against world-class opposition from the German BMW Mercedes and Audi, and the Lexus from Japan.

Diesel power, with its superior fuel economy and smooth power delivery, seemed the ideal solution for large SUVs and sports sedans. Even the “dieselgate,” that is, when Volkswagen was discovered covering pollution levels in 2015, and diesel engines fell out of favor. Until 2018, over 90% of Land Rover production was still running on diesel

Both Jaguar and Land Rover use too many so-called “platforms” and these must be drastically reduced to cut costs and shorten development times. “Platforms” are the basic engineering necessary to make a vehicle. In times past, each car would have had its own components, from the city mini-car to the family vehicle to the car to the high-end high-speed cruiser. Now even the largest manufacturers use two or sometimes three basic “platforms” that can be the basics, for example a city car, a small SUV, and a sports car. Companies like VW also used this on various brands.

But Jaguar faces an existential threat.

Jaguar’s sports sedans, the XE and XF, and the XJ’s big limousine haven’t caught sales in a world where SUVs are king. The small XE, unleashed to fight the BMW 3 series, went ahead for about a year, before stopping about a third of the way to its annual sales of 100,000 a year. Fortunately, the long-promised and delayed adoption SUVs came with the F-Pace in 2015 and the E-Pace two years later, but even these top sellers came with the suspicion that they might have been at the expense of Land Rover. The all-electric I-Pace has generated favorable publicity but not much in terms of actual sales.

What is the jaguar?

And Jaguar seems to have lost track of what its market position is, what it can do better, and where it can find high-profit margin sales. As Tata Motors carries out its cost-cutting agenda, some of its sedans like the XE and XF may be conducive. The grand XJ limousine is about to go all-electric, while a promised massive J-Pace SUV, expected in 2021, would fit the US market, even the largest Jaguar, perfectly. The J-Pace would expect to receive sales of the Porsche Cayenne, although it could also affect some Range Rover prospects.

It is also suggested that Jaguar could shift to become an all-electric brand, while rumors persist that he or all of JLR could be sold to Groupe PSA or an ambitious Chinese company. JLR’s recent agreement to manufacture battery components with BMW suggests where a future alliance could take place. Soon to retire, JLR CEO Ralf Speth said the company can stand on its own, but needs to build alliances. This is the only way to ensure that JLR can compete with the massive cost base advantage of the much larger German and Japanese competition.

Professor Ferdinand Dudenhoeffer, director of the German Automotive Research Center (CAR), believes that Tata Motors’ leadership is committed to Jaguar, but the initial actions should be painful.

“The need now is to reduce capacity and lay off workers as demand eases, but that is not the solution. My feeling is that if a broad alliance could be agreed with BMW or any other manufacturer interested in making premium cars, that would make sense, ”said Dudenhoeffer.

Dudenhoeffer said the Groupe PSA reports, which include Peugeot, Citroen, Opel and Vauxhall and, shortly, Fiat Chrysler Automobiles (FCA) would also not be the right choice for Jaguar or Land Rover.

Jaguar needs innovation, not cost reduction. (PSA CEO Carlos) Tavares would put the Jaguars on Opel’s platforms and that would not end well, as it did with Ford a few years ago, “said Dudenhoeffer.

Ford Motor bought Jaguar in 1999 and Land Rover in 2000 before selling them to Tata Motors in 2008.

Jaguar will survive

Dudenhoeffer believes that, overall, Jaguar will survive.

“It depends on the possibility of cooperation and on reducing development costs. If there is success in that, yes, you have a good chance of surviving. It would be great to make a deal with BMW, however I think it will not be easy. After September, Speth will no longer be CEO and understands BMW (Speth was hired by BMW). If a guy without his experience runs the company, it will be a little more complicated, “said Dudenhoeffer.

David Bailey, a professor of business economics at the University of Birmingham, said Jaguar must establish a niche as the sporty and electric alternative, even with its SUVs.

“I think JLR has been trying to do too much, using 4 or 5 different platforms, while a manufacturer like Volvo uses only 2 and is not trying to compete across the board, but just going into niches. Jaguar has to go to the premium luxury electric market and is already doing it with the XJ, ”said Bailey.

Bailey said that as Europe recovers more slowly from the coronavirus than China, Chinese companies are inevitably looking to make acquisitions, and Jaguar could be on their radar. Groupe PSA may also be interested. But he still thinks Jaguar can do it right.

“The Jaguar brand means a lot in the US, its largest market, and it has global appeal. Jaguar has been too slow in new technologies and new markets. Was it too slow on diesel, slow on SUV and now it is going to be slow on electrification? But he’s been trying to be everything to all men, but he couldn’t compete with companies like BMW. You really need to focus on niches, ”said Bailey.

John Wormald, an analyst at British automotive consulting firm Autopolis, agrees.

Go more niche

“I think Tata will keep Jaguar running with a reduced product line and a big cut in investments. The solution, if there is one that works, surely has to be to go more niche. They cannot face off against Audi, Mercedes BMW for reasons of product / production scale, but also for dealer networks and market access. They have a strong brand and image that still remain, and it’s still very much tied to racing, ”said Wormald.

Should Jaguar go fully electric?

“The issue of propulsion is very difficult. I have my doubts about electric cars. The diesel problem is a pity, it was the perfect solution for the great upper rear wheel drive (sedans) and its immediate derivatives. Back to (gasoline) engines? Bet that not everything goes electric, even if heavier taxes are applied to liquid fuels? Wormald said.

Bailey of the University of Birmingham said that if Jaguar decides to embrace the premium luxury electric niche, it must move quickly before it is flooded or it will no longer be a niche.

Will there be Jaguar in 5 years?

Distinctive and sporty

“I hope it is. I think it is a brand that has a lot of resonance around the world. JLR has to build Jaguars on common platforms with distinctive sports cars that use the same underlying technology as Land Rover,” said Bailey.

CAR’s Dudenhoeffer sees many possibilities for Jaguar and Land Rover, including alliances and acquisitions that offer the chance of long-term success, except one.

“The worst case from my point of view is if he goes to PSA (Groupe),” said Dudenhoeffer.