Motoring expert Charles Tennant says Jaguar Land Rover might surprisingly return a profit for the last financial year and is now set to go 'flat out' in a bid to become the world’s leading modern luxury car manufacturer.
The Coventry-based car company had already announced a profit of £265m in the three months up to December, despite making a loss of £9 million the year before. The final year results still have to be announced, but JLR has already signalled that sales continued to rise in the last three months of the financial year, which Mr Tennant expects will lead the company to announce an profit on the year.
And JLR owner Tata Motors has allocated £15 billion over the next five years to deliver a range of initiatives, including vehicle programmes, manufacturing facilities, vehicle electrification technology.
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Mr Tennant said: "Whilst we wait for the March 2023 quarter and year-end financial results – due next month – JLR have already said that sales were up 30% to 102,889 for the quarter and that all important measure of free cash flow was £800 million. This means we may yet see a profit for the full year, which is quite amazing as the company had a £697 million headache in the form of losses for the April to September 2022 period to catch back.
"I was privileged to attend a media event last Wednesday for around forty global business journalists and commentators at Jaguar Land Rover’s Gaydon Headquarters. At first, I was a little sceptical because after all I have been extremely critical of the company’s strategy and performance over the past four years.
"But quite rightly so as JLR as it now wishes to be called had lurched from a profit-making business to heavy year-on-year losses since 2019. Obviously there have been some geopolitical causes such as Brexit and the move away from diesel engines – JLR was heavily invested in diesel – and Covid and supply chain disruptions, of which the semiconductor shortages were the most critical.
"Also, JLR has been noticeably quiet regarding its Reimagine Modern Luxury by Design strategy launched by CEO Thierry Bollore who left the company in December 2022 after only two years in post. Then Adrian Mardell who was CFO was announced as Interim CEO – who surely could only caretake Reimagine until a new CEO is recruited.
"Anyway, I set off to Gaydon that morning at least with an open mind – would there be some big strategic relaunch or merely a run-of-the mill business update? I hadn’t been to Gaydon for quite a few years since I was a Chief Engineer there and I was immediately taken by how grand the place felt as I was swept into the Advanced Product Creation Centre.
"JLR’s Interim CEO Adrian Mardell, a 32-year company veteran, started the show with his presentation, and I was captivated. No mention of fancy vision or mission statements or key performance indicators just a straightforward message throughout of where the business was, what it was aiming to achieve, how much it would all cost, and how he had a brilliant board team and 40,000 highly skilled company associates and 200,000 top supplier employees all working flat out in top gear to deliver the Reimagine strategy.
"He actually said "this is personal" so he really is deeply committed and involved, and you get the impression that he is able to engender this on JLR employees at all levels. His strapline is "Magic in the Midlands" and that surely must resonate with the workforce here who are involved in vehicle design and development.
"Following Adrian there were further presentations from five of his brilliant board members: Chief Creative Officer – Gerry McGovern, Chief Commercial Officer – Lennard Hoornik, Executive Director Vehicle Programmes – Nick Collins, Executive Director Industrial Operations – Barbara Bergmeier, and Executive Director Product Engineering – Thomas Muller.
"I was taken by how aligned they all were behind Reimagine, and it wasn’t just their PowerPoint slide decks either, as with Adrian’s presentation I could actually feel the passion they have towards their area of responsibility in executing and delivering the plan. Achieving corporate alignment like this is not easy at all – I have seen how difficult it is in over 40 years of industrial experience myself – and that was a big tick-in-the-box for me.
"But what has been delivered to date and what is next? Well in the December 2022 quarter 84,827 vehicles were sold delivering a £6.0 billion revenue (up 28%) and profits of £265 million from a loss of £9 million the year before.
"Whilst we wait for the March 2023 quarter and year-end financial results – due next month – JLR have already said that sales were up 30% to 102,889 for the quarter and that all important measure of free cash flow was £800 million. This means we may yet see a profit for the full year, which is quite amazing as the company had a £697 million headache in the form of losses for the April to September 2022 period to catch back.
"And – mainly due to the semiconductor shortages – JLR has an order book of 200,000 vehicles reflecting strong demand, particularly for the highly profitable Range Rover, Range Rover Sport and Defender. But there are some other critical and amazing achievements that include lowering the company’s financial breakeven point from 660,000 vehicles in 2019 to 300,000 today whilst increasing the average selling price of £44,00 in 2019 to £72,000 today.
"The “dash for growth” chasing sales volumes against the likes of BMW, Mercedes Benz, and Audi era is now long gone and the order of the day is lower volume higher price sales to deliver double digit profit margins and be debt free by 2026. And it is all being achieved from world beating vehicles such as Range Rover and Defender, with more superlative to come later as the whole range is rejuvenated through technology advancements.
"The next stage of Reimagine is to accelerate its transition to become the world’s leading modern luxury car manufacturer – by putting the company flat out in top gear. And it has the money to do this with never ending support from its owner Tata Motors who have allocated £15 billion over the next five years to deliver vehicle programmes, manufacturing facilities, vehicle electrification technology and software, autonomous vehicles, digital technologies and of course people.
"And at last, JLR is accelerating its path to electrification – having been criticised for squandering its position as first to market with the premium battery electric Jaguar I-Pace – and is collaborating with technology titans: Tata Consulting Services (TCS), Tata Technologies and NVIDIA to achieve this. JLR also now has seven technical centres around the world and 25% of its engineering resource is now software design orientated – JLR has nimbly recruited from the technology companies (Facebook, Google and Twitter etc.) who have made redundancies in the last year.
"Also, the Tata group have committed to providing a battery gigafactory – either in Spain or the UK depending on government incentives, and do I hope our UK government will prevail to enable the second UK gigafactory (the first will be at Nissan in Sunderland) – and as the anchor customer JLR can rest assured of uninterrupted supply of this key component for their electric cars – JLR have secured battery supplies elsewhere until the Tata gigafactory is up and running.
"And what of these electric cars? Well, the first one out of the stable will be a Range Rover due in 2024 followed by a Jaguar 4 door GT in 2025 to be built at the Solihull factory.
"The Jaguar plant at Castle Bromwich will be repurposed to supply body stampings in the future, whilst the engine factory at Wolverhampton will become an Electric Propulsion Manufacturing Centre, and the Halewood plant will become an all-electric manufacturing facility. It would seem that the UK factories are safe along with their employment secured, which is great news indeed.
"Regarding Jaguar it now becomes one of the four House of Brands along with Range Rover, Discovery and Defender, which Gerry McGovern – who is responsible for the new Jaguar designs – said is a natural evolution of elevating and amplifying the uniqueness of their characterful British marques. This leaves the spirit of Land Rover as a trust mark underpinning the technology and engineering expertise across Range Rover, Discovery and Defender. The new Jaguar will be a drop-dead gorgeous copy of nothing (evoking the spirit of Jaguar founder Sir William Lyons) and will sell at over £100k in volumes at around 50,000 when the other two Jaguars are in production later on.
"To deliver all of the vehicles JLR is moving from seven vehicle platforms down to three: Modular Longitudinal (MLA) for battery electric, hybrid and combustion engine Range Rover and Range Rover Sport; Electric Modular Architecture (EMA) for battery electric Range Rover Evoque, Discovery and Defender vehicles from 2024; Jaguar Electrified Architecture (JMA) for the three Jaguars.
"This will offer flexibility for the ongoing need for some combustion engines vehicles whilst giving production and cost efficiencies at plant level. To sell the vehicles in the future the commercial arm of JLR is looking into dealership rationalisation and new corporate identity, whilst creating innovative online ordering facilities for customers – so called three clicks to order.
"It all sounds very promising, even if some may dismay at the so called relegation of the storied Land Rover nameplate – and I am not one of them – and even though it does mean yet even more investment in dealership corporate identity and some rationalisation of Jaguar dealerships – said to be from 80 to 20 in the UK alone – change is coming for JLR and it is necessary for a sustainable future on its way to being a profitable, debt free and carbon net zero company.
"I am now over the moon that at last JLR is running flat out in top gear and shall be watching every move they make. For one, quality has been an Achilles heel for JLR whether it’s the JD Powers initial quality surveys or longer-term reliability consumer reports and they have to nail this once and for all with these new vehicles, meanwhile they are reporting that their most recent launches are showing very promising improvements in this regard.
"One thing I have to say is that I think Tata should stop any thought of hiring a new JLR CEO as they have someone already in the corner office and his name is Adrian Mardell and they should ditch the interim prefix from his title."
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