A perfect storm for JLR?
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A perfect storm for JLR?

The media are not pulling any punches. The headlines are pretty much the same everywhere; “Jaguar Land Rover to slash 4,500 jobs as part of £2.5bn plan to reverse losses”. And it’s a shame really, as JLR is a UK brand (although owned by Tata) and we’re always behind anything homegrown.

Some of the trouble came in the form of one of its big markets, China, having its first decline in new car sales in 10 years. It’s been a boom for not just JLR, but most of the big automotive brands.

The other big issue, helping JLR’s perfect storm develop, is its reliability on diesel powerplants. But, there’s no point discussing this really, as the whole e-movement has been gaining pace for a fair few years now.

Anyway, I was interested in why China was slowing down buying new cars. If you read the headlines, you’ll know that on July 6, the Trump administration imposed an additional tariff of 25 percent on $50 billion worth of Chinese goods. This isn’t good, but it’s also not the whole story.

The one big problem in China revolves how they finance motors.

In 2015, the Chinese government legalised peer-to-peer platforms, which peddle loans online between cash-rich individuals and cash-poor consumers. The number of such platforms has mushroomed, topping 8,000 by the end of 2017, according to the People's Bank of China, the country's central bank.

And, a large number of the platforms are badly managed as to attract lenders, they promised interest rates several times higher than rates banks paid on savings and other deposits.

The results are, as always, predictable – if it seems too good to be true, it probably is.

JLR

An increasing number of platform users defaulted on payments, borrowers went dark, and lenders now seek government help to recover funds.

Statistics provided by wdjz.com, Shenwan Hongyuan Securities, of Shanghai, a major Chinese securities firm, believes the contribution rate from peer-to-peer lenders to new-vehicle sales was somewhere between 10 and 15 percent.

Oops. So, whilst that kind of stuff is out of JLR’s control, it’s easy to see how a market with that kind of infrastructure could go pear-shaped.

But is that all? What about brand perception? The Chinese market were paying top dollar for Range Rovers, Discoverys and Evoques (with big doses of import taxes applied). And if you’re paying a premium price, you expect premium quality.

So, I had a look into the online automotive forums to determine car-buying sentiment in the UK for starters. The general view on places like PistonHeads is that the quality of a lot of Jaguar and Land Rover products is not as high as it is perceived. And, there are lots of negative comments. This begs the questions - if you have a difficult time with your new and expensive motor, would you return to the same dealer at replacement time (which is on average every three years)?

Like I said at the head of the story; we love our traditional brands in the UK and we’re happy to put up with a bit of bother, for the sake of wafting along in our Jaguar or Jeep.

But, in a market like China there’s a lot of personal pride and ‘face’ to contend with, and if your motors in the shop, that’s not good.

I’m not sure that JLR could have predicted the China crisis (!), but could it have done more on its engine tech and build quality? Has it relied too much on a brand promise, that has proven difficult to deliver, in terms of quality?

If the planned costs come in to place and it sheds marketing folk, will this turn its fortunes around? The next twelve months will certainly be interesting, that’s for sure.

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