17 April 2018

JLR's Reality Check

The new E-Pace hails from Austria

JLR has just announced it will let go 1,000 agency workers. Many headlines popped up and the word Brexit kept popping up. I don't know whether the writers were using the situation to push their political views or just ignorant of reality but either way it is typical journalism, to be taken with a pinch of salt. So what's going on?

1) Agency staff are employed to cope with the peeks that come with a cyclical industry. When the the peek troughs, their contracts are not renewed. That's what has happened here. Amazing what the media can make a headline out of.

2) The UK government has been coming down hard on diesel powered vehicles. Diesel cars have had to endure a tax hike and cities are wishing to ban the vehicles. JLR is almost wholly dependent on these engines and has suffered accordingly. How different to Germany where the government seems to want to limit any anti-diesel actions that would hurt the car industry. The UK car industry will not get such protection which is a stark contrast with pro-manufacturing Germany.

3) New models such as the E-Pace and the i-Pace are being built in Austria and a plant is being built in Slovakia. New models are being added to the Chinese joint venture plant. These decisions were always going to impact on JLR production at home. It's good not to rely on one location for manufacturing but for now it will impact on domestic production.

4) The UK market is slumping in line with popular diesel cars. The US market is starting to fall back and China has plateaued. 59% of Land Rover and 66% of Jaguar sales were from those three markets in 2017. Their lack of future growth in the immediate future will impact production. If China cuts its import duty, there may be some relief for JLR from that.

I have noticed here in NZ a noticable increase in television and print advertising for JLR models. That needs to happen as the company should be looking elsewhere for growth as the top three cannot be relied upon. There is huge potential in many markets for greater penetration.

5) JLR has been involved in a product onslaught as new models have widened the segments its competes in. Apart from new models being built off shore, the new models will now slow. Those factors have to impact on UK production.

6) While JLR does enjoy some home town support, it's nothing compared to countries like Sweden and Germany, where locals buy 'their cars' with a loyalty JLR can never expect. If more Brits supported JLR, jobs would be protected but modern day UK isn't like that.

Summary: So all the above was to show that JLR will be cutting back on domestic production. I was expecting it to level off but the diesel clamp down in the UK has impacted far more than I expected. I'm sure German politicians have taken note. JLR is moving toward alternative fuels but like the industry as a whole, isn't as well prepared as it could have been. This is a reality check for JLR and the industry collectively. Who would want to run a car company?

The i-Pace. More of the same please

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