Jaguar Land Rover is going from break even to posting a huge loss thanks to falling demand for their vehicles.
Things are not looking good for British carmaker Jaguar Land Rover. On Thursday, parent company Tata Motors Ltd. posted a $4 billion loss thanks to falling demand, particularly in China and Europe. Jaguar Land Rover brings in most of the revenue for Tata Motors, which means that most of that loss is on JLR’s shoulders.
Previously, Jaguar Land Rover had been projected to break even for 2018 but an overall contraction in vehicle demand in China, as well as reduced diesel sales in Europe, have hit the beleaguered carmaker hard. Overall sales are down by 11% last year, according to Reuters, with sales almost halved in the third quarter.
Demand for JLR vehicles in China is way down, but so too is demand in Europe where Brexit weighs heavily on the British automaker. On top of worries over Brexit, declining diesel sales are particularly troublesome as just under 90% of the company’s cars sold in Europe are diesel. More and more European car owners are switching to cleaner-burning fuel alternatives or abandoning gas altogether in favor of zero-emission electric cars.
Chief Financial Officer PB Balaji told investors that Jaguar Land Rover will return to profitability and announced an ambitious plan. “We are now taking clear and decisive actions in JLR to step up its competitiveness, reduce costs and improve cash flows and make the business fit for the future,” he said.
Step one was announced earlier in January with JLR cutting 4,500 jobs mostly in management areas. Research and development budgets will also be slashed, and analysts expect at least one of the company’s UK-based assembly plants to shut down.
In China, JLR will switch its strategy from market penetration and mass sales to focusing more on profitability. What this will mean for their dealer network is hard to say as overall demand for vehicles in China has fallen for the first time ever, but shrinkage there could be a possibility as well.