The Chinese joint venture of Jaguar Land Rover recorded its first financial loss in five years as operations got crippled by the COVID-19 outbreak. New launches coinciding with the lockdown made the situation worse for the company..
Chery Jaguar Land Rover (CJLR), the 50:50 joint venture that assembles the Range Rover Evoque, Land Rover Discovery Sport, Jaguar XEL, XFL and the E-PACE, reported a net loss of GBP 224 million during FY20, its biggest since starting operations in 2012-13.
The JV company reported profits in four consecutive years starting FY16 but not before reporting losses in each of the previous three financial years ending March 31.
For the most part of FY20 Tata Motors-controlled Jaguar Land Rover depended on direct exports from the UK of fully built vehicles to China for volumes as volumes from the JV business remained low.
Though sales of JLR vehicles contracted on the whole in China the fall in CJLR volumes was steeper than the direct imports from the UK. CJLR wholesale volumes dipped 14 percent to 49,450 units in FY20 whereas wholesale volumes of direct imports declined by just 5 percent to 38,312 during the same year. Total JLR wholesale volumes slipped by 10 percent to 87,762 units in China during FY20.
Besides the impact of Covid-19 on production and subsequently on wholesales CJLR suffered model transition blow wherein an existing model was made to exhaust from the retail network fully before the company dispatched the new versions. Made by CJLR the Discovery and Discovery Sport got hit because the new versions of them were slated for launch in the final quarter of last year while the older versions were on their way out.
But, as of the June quarter of FY21, CJLR’s retail volumes (JLR did not share wholesale numbers till the time of printing this article) bounced back to nearly the same level as the same quarter in FY20. At 14,083 units, CJLR retails were nearly on par with the same quarter in FY20 even as retails of direct imports declined 5 percent to 9,643 units.
Further, the comeback of China in Q1FY21 was so strong that the country once again became the single largest market for JLR accounting for a third of JLR global volumes with sales of 23,726 units followed by North America with volumes of 20,833 units.
Rising litigation claims
In its annual report Jaguar Land Rover declared that there were claims and potential claims of GBP 40 million (Rs 385 crore) against the group as by end of FY20. This was more than double compared to FY20 and also the highest ever. In FY19, the JLR Group had claims of GBP 17 million (Rs 160 crore).
“These claims and potential claims pertain to motor accident claims, consumer complaints, employment and dealership arrangements, replacement of parts of vehicles and/or compensation for deficiency in the services by the Group or its retailers,” JLR declared in the annual report.
To bring in efficiencies, JLR is going aggressively after costs and cutting back on undeclared but unviable projects. Project Charge (now Charge+) has achieved cost, profit and cash flow improvements of GBP 600 million in Q4.
“Given the continuing external challenges, compounded by COVID-19, Jaguar Land Rover has increased the Charge+ target for Fiscal 2020/21 to GBP 1.5 billion of cost, profit and cash flow improvements,” said Adrian Mardell, chief financial officer, Jaguar Land Rover Automotive plc in the annual report.
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