Global markets to become more competitive for Jaguar Land Rover: CFO
Wholesales volumes are expected to come under pressure in some of the JLR’s premier markets like the UK and the US
Markets across the globe, where Jaguar Land Rover operates, are set to become more competitive than they are at present as lower economic and automotive demand growth will impact volumes.
Wholesale volumes (from company to dealers) are expected to come under pressure in some of the JLR’s premier markets like the UK and the US, both of which control 47 percent of the total volumes of the Tata Motors-controlled luxury brands.
Speaking to analysts after announcing the first quarter results, Kenneth Gregor, Chief Financial Officer, Jaguar Land Rover said, “We do see the car market becoming a bit more competitive in a number of those regions as the volumes peaked and are somewhat lower, for example in the UK and then in the US compared to this time last year.”
Wholesale volumes dipped 2.4 percent in the quarter ended June 30, 2017 to 117,916 units as against 120,768 units clocked in the same quarter last year. Retail volumes, however, were slightly up by 3.5 percent to 137,463 units as against 132,753 units sold in the two comparable quarters.
“We see Russia recovering a bit. We see the Middle East is down. We see South Africa is down. We see Brazil is down. We see Australia is a bit of a mixed picture and South Korea a bit of a mixed picture,” added Gregor.
Other challenges for JLR include the roll out of new products that would carry higher marketing costs and lower net addition to the bottom line. The Range Rover Velar, for instance, which was launched last month has been launched only in limited markets and thus has to be marketed in other markets.
Further, the manufacturing of E-Pace, a compact performance SUV from Jaguar is outsourced to Magna Steyr, in Austria. JLR stands to lose on the manufacturing margins on the E-Pace, which will be launched this winter.
As per JLR’s outlook, its investment spending this year will mark a jump of whopping 28 percent this year to £4-4.35 billion from £3.4 billion. This will include launch and production ramp up of Discovery, Velar, i-Pace to name a few.
However, China, which is the largest market for JLR followed by Europe, is predicted to report growth in line with the growth in their economies. Retail volumes in China (including volumes from a local joint venture) grew 30 percent in Q1 compared to the same period last year.
Net consolidated profit of Tata Motors rose 42 percent, thanks to a large one-time gain arising from changes made to JLR’s pension plan, which negated the muted wholesale volumes. JLR volumes were lower by 2.4 percent if the China joint venture is excluded, the company said.“Looking forward, our business is about creating exciting new cars and SUVs that our customers would love and we've got a very strong product pipeline of new products that we are launching this year and beyond. And it's that that I think gives us the best opportunity to be able to continue to grow our volumes despite one or other economic challenge in one or other region around the world,” added Gregor.