Jaguar Land Rover has become a complex problem for Tata of recent times. Besides suffering from a killer Brexit vote hangover and massive job losses early this year, the brand has been trying to smooth out its complex logistics and operational structure to turn a profit.
I've seen Jaguar Land Rover as a bit of a conundrum myself actually. I mean, the brands have been in positive growth over the previous 5 years and Land Rover vehicles have one of the biggest profit margins of any other vehicle on earth. At a very simplistic level, those two things alone should be ingredients for fantastic financial health. But the fact is, finance and economics are not simple. And something is going severely wrong at Jaguar Land Rover as a result.
Let's quickly run through what Jaguar Land Rover have gotten right at the moment. Their product is good. In fact, it's the best it has ever been. Quality, technology, innovation and design makes Jaguar Land Rover market leaders in 21st century automotive. They were the first to market of the big luxury marquees with a serviceable EV but at the same time, they've managed to embrace their heritage with vehicles like the F-Type and the Defender.
Pricing has been really good as well. They've created a lineup which ensures no luxury customer is priced out of the market and in the process they haven't become lax on specification. We saw that with introductions like the Land Rover Discovery Sport, the Jaguar XE and the E-Pace. At the same time, they've developed a niche in the SV brand, offering highly customised and special products for the above-average driver.
Dealership numbers worldwide have steadily risen without blowing out of proportion as well. Making the product accessible, but managing the "7/Eleven" effect well.
And thanks to all this, we see steady growth in market share and year on year results. Jaguar last year at one point was up almost 180% worldwide thanks to the introduction of the E-Pace. So what went wrong, and what can they do about it?
Well, I can't speculate as towards what really went wrong. I can say in most businesses I've worked in that have needed "fixing" there's normally been an issue with one of the following; logistics, staffing or criminal activity. I'm not saying Jaguar Land Rover fits into any of those moulds. But an issue with any of them would make a lot of sense.
By the by, the company is in trouble. Jaguar Land Rover is a sinking ship with Tata being the desperate captain using a bucket to remove water from the lower decks. Renowned New York asset management firm AllianceBernstein might have a solution though. They've suggested most recently that another manufacturer with previous ties to Land Rover may be able to come to the aid of the ailing British outfit. Better still this same brand already has two other well-performing British luxury marquees under their banner. That automotive group is none other than the Munich based BMW Group.
“BMW is overcapitalised and awash with cash. It has run into the limits of growth for its product range and brand,” a research note issued from Sanford C. Bernstein analysts read.
“JLR is severely challenged, both operationally and financially, but could massively lower both its fixed and variable costs under the wing of a bigger partner.”
I tell you what, from someone who works with both brands as well, it doesn't seem like the worst idea. Jaguar Land Rover and BMW's similarities and differences are almost perfectly balanced. Bar everything else, BMW once owned Land Rover. They're well familiar with the dangerous territory which would await them. Bar everything else, BMW signed a memorandum of understanding with Jaguar Land Rover earlier in the year on the sharing of EV technology. So the two brands already have a working relationship.
This is where I do start getting speculative. If I were BMW Group's CEO, I would be considering a couple of things that the conservative brand and it's originally conservative sub-brands; MINI and Rolls Royce, could benefit from and what BMW could bring to Jaguar Land Rover in return.
We were talking about issues that Jaguar Land Rover might have been experiencing. One of those issues could be logistics. BMW already have an extensive logistics network set up both out of the UK and Europe. Not just that but they have trade partnerships with China and have an extensive dealership network built from the ground up in the Americas thanks to MINI and Rolls Royce. That means that it would be easier to get a Jaguar Land Rover product from factory to showroom anywhere on earth.
This works the same for staffing. Whilst you'd presume marketing, design, engineering and testing staff need to stay separate, the same cannot be said for logistics, finance and some executive members. You could theoretically merge the structure allowing for the removal of some potentially expensive staff members.
Jaguar has just announced the end of the current XJ which leaves a market gap for JLR at that high-end market which can only be filled by Land Rover's Range Rover Vogue. But that's not to say current infrastructure cannot be utilised to present and deliver the Rolls Royce in the same market. Whilst the XJ was much cheaper, at the level which most bought it the pricing and demographic matched fairly well with most Rolls Royce vehicles. It could theoretically present an opportunity to slightly increase Rolls Royce's overall sales volume.
BMW have classically also lagged a bit behind in technology. They've been known to be quite conservative, and that hasn't been a bad thing for them. The technology they place in recently launched vehicles has worked extremely well. Jaguar Land Rover on the other hand in recent years have been known for their massive surges forward in technology. So if BMW wanted to speed the process up a bit? Why not starting using Jaguar Land Rover vehicles as a testing ground for new technology that they might not necessarily want to launch in their current vehicles.
Volkswagen is currently doing the same with the Volkswagen/Audi partnership. They do this by seeding vehicles like the Volkswagen Tiguan extra early and with next-generation technology which they then attempt to perfect for the forthcoming Audi counterparts.
Bar everything else Tata, which have admittedly done ridiculously well with Jaguar Land Rover, purchased the British outfit years ago from Ford for $2.3billion US. AllianceBernstein now claims that the company is valued at 9billion British Sterling. That means that in mere years, the company has made upwards of $16billion US. Surely at a profit like that, you'd be happy to let the company go at a little under expectation. It's definitely not a loss at any measure. And considering the company's profits in previous years against Tata's investment in their new factory and supply chain you couldn't complain about a higher valuation.
The question is, will Tata bite the bullet in time? Or will they continue to attempt to plug their leaky ship with staff cuts and shrinking of otherwise successful company niche products? But I think the bigger question is, are BMW ready to dig up the old wounds of their Rover ownership? Because if they are, they could potentially once again become the biggest luxury automotive marque on earth.