JLR and The Leap of Faith
Sep 18,2013  •   1865 views  •  Source

Both Jaguar and Land Rover have now got a burst of speed, but they need to ensure that the engines don’t run out of steam. This sudden momentum could be because their present owner Tata Motors has reposed greater confidence in the iconic brands than the brands themselves did.

Ask Jaguar Land Rover executives what has changed since Tata Motors took over the company – Tata Motors paid $2.3 billion or Rs 9,200 in 2008 to buy them from Ford – the replies you get are pretty much standard.

Nothing much, we are a separate company…But then you point out to them that not many gave Tata Motors much of a chance to turn around the ailing British brands. One of the executives points out that the media was cynical when it passed this judgment. Not cynical, just skeptical, you remind him, given that Tata Motors was largely a truck maker, and had got into making cars just a little over a decade back.

The single biggest change

It was another executive, during informal discussions at the Frankfurt Motor Show recently, who put things in perspective. Jaguar and Land Rover were part of Ford and BMW, separately at first, and then under Ford since 2000. Then, the two brands were a small part of the large companies called Ford and BMW, which took all the decisions. Even now, JLR is a small part of a conglomerate called the Tatas, the executive points out. But, what made the difference was a talk that the then Tata group chairman Ratan Tata had with JLR executives.

Tata, according to this executive, made it clear that he had decided to go in for JLR mainly because of the heritage and iconic status both enjoyed. It was up to the executives to restore the icons to their original status, Tata told them.

Now, says the JLR executive, the company is responsible for all its decisions and can no longer pass the blame on to someone else. This is the single biggest change.

Stepping on the gas

JLR has reported increased sales and has announced a new plant in China, and that it is looking at Saudi Arabia and Brazil for plants in future. It has announced huge investments on a new engine manufacturing plant – which is expected to reduce its dependence on Ford for engines – and new products and platforms.

At the ongoing Frankfurt Motor Show, JLR made two significant announcements – one that it is going in for a lightweight aluminium architecture on which will be built all Jaguar cars in future; and, a concept of a sports crossover from Jaguar. The first vehicle on the new architecture, positioned in price below its XF range, will hit the market in 2015.

Market abuzz

JLR’s competitors – BMW, Audi and Mercedes-Benz – may not be too worried as the gap between JLR and the three German companies is huge, but the market is definitely buzzing. Both BMW and Mercedes-Benz have launched entry-level luxury cars and all the three German makers are already into the SUV segment.

But, for JLR – a company that was almost written off a few years back – this is a momentous step. One that it is taking with a lot more confidence now than it probably did in the last decade and a half.

A comparison of the sales over the last five years, since Tata Motors bought JLR, will give an idea of the long haul ahead for the UK based carmaker. In 2008, JLR had sold 252,036 vehicles, which jumped 42 per cent to 357,773 in 2012. During the same time, BMW’s sales increased 28 per cent, from 1,202,239 cars to 1,540,085; Mercedes-Benz’s was up 14 per cent, from 1,273,013 to 1,451,600; and, Audi’s jumped 45 per cent, from 1,003,469 cars to 1,455,123.

The secret of success

As John Edwards, Global Brand Director, Land Rover, said at a press conference at the Frankfurt Motor Show, over the past three years, the business had been through a remarkable transformation. The secret of the success, he said, was that JLR understood the SUV market better than anyone else. The company would continue to grow the business around three aspects – luxury, leisure and dual purpose.

That the British carmaker is serious about growing the business can be seen from the fact that it is an ex-BMW veteran, Ralf Speth, who is now JLR’s CEO. He was appointed to that post in February 2010. And Wolfgang Ziebart, who had over two decades in BMW’s R&D and then at automotive supplier Continental and German chip-maker Infineon, has been pulled out of retirement and appointed Group Engineering Director of JLR.

That JLR’s fortunes have turned can also be seen from the fact that it was thanks to a Pound Sterling 150 million (Rs 1,420) dividend that it paid its parent in June, that Tata Motors was able to report a Rs 703 profit after tax in the first quarter of this financial year.

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