Jaguar Land Rover is staring at a sales ‘hattrick’ it didn’t want

Jaguar Land Rover is staring at a sales ‘hattrick’ it didn’t want
  • This may be the third straight year of falling sales for the luxury car maker.
  • JLR’s total sales this financial year so far have been lesser compared to the year earlier.
  • However, the company is hopeful that new car launches will boost sales in 2020.
Jaguar Land Rover, the British luxury subsidiary of Tata Motors, has sold less cars this compared to the year earlier, for the third straight time now.

The loss from the British luxury car maker owned by Tata Motors has now widened in four out of the last five years. There were three big reasons for the poor performance, according to a Motilal Oswal report in December 2019.

1. Worsening market conditions in its biggest markets like the UK and China.
2. The product pipeline had more Jaguar cars while Land Rover cars like Evoque had more demand.
3. Dealers losing interest because the deep discounts left less margin on the table.

The estimate from Goldman Sachs is slightly better but nothing to really cheer about. “We raise our volume forecasts for JLR by 1% and 3% for FY20 and FY21 respectively as we factor in better volume outlook for the Defender — we estimate 50k units in FY21 vs. the previous high of c.22k units in FY16,” a recent report from the global investment bank said.

The impact of Brexit on JLR is getting more pronounced

The people of the UK voted in favour of exiting the European Union in June 2016, and since then the fortunes of JLR have been declining faster every year. Ralf Speth, CEO, JLR had then famously said that “Brexit could kill off entire industries”.

Then, China sprang a surprise

Even as it was trying to figure out how to deal with Brexit, the company got another blow with a double digit drop in sales in one of its biggest markets – China. In the second quarter of 2018, China sales numbers were down by 47%. It was also in cost cutting mode, and reportedly axed 4,500 jobs in late 2018.

For the quarter ending December 31, 2018 Tata Sons’ Jaguar Land Rover saw a loss of $3.4 billion following a big write-down in the value of the company.

The third big blow: Donald Trump’s trade war with China

Enter 2019, the US-China trade war worsened a global economy that was already showing signs of a slowdown, and JLR sales continued to fall.

In early February this year, the record losses from JLR also resulted in Tata Motors stock falling by 17% in a single day. The parent company was also staring at one of the worst slumps in car sales at home too.

What’s in store for JLR in 2020

Hope floats that the US-China trade war will thaw. “JLR’s volume is showing signs of bottoming-out on a low base in China and the ramp-up of the recently upgraded Evoque model—the start of defender sales in 4QFY20 should provide a further boost,” a recent CLSA report said.

The recent electoral victory for British Prime Minister Boris Johnson may also bring in a certain level of certainty in the UK business. It may not be the ideal but businesses can work around risks as long as they are predictable.

New year, new launches⁠— and a hope of a better future

The company has pinned its hopes on two new models Land Rover Discovery Sport and Range Rover Evoque spell hope. “Despite the ongoing headwinds in China, we continue to see green shoots of recovery in our sales there. The intensive work with our retailers in the region, combined with significant process and product improvements are starting to gain traction,” Brautigam had said as they released their November numbers.

The older model of Evoque has been a bestseller for JLR. Even in a tough year like the current one, the model clocked a 25% growth, compared to a year earlier, in sale volumes while almost every model sold fewer cars for the company.

In December 2019, JLR also launched its new Jaguar F-type. It also has the launch of the revised version of the iconic Land Rover Defender coming up, which could again bring in the buyers.

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Tata Motors and JLR have a lot riding on the 71-year old iconic Defender that is set for a comeback in 2020