Record profits put Jaguar Land Rover in pole position

Posted on 30 May 2013 by Tim Brown

Positioning is paramount in the car industry and Jaguar Land Rover are in pole position says a car industry expert, following the announcement of the company's record profits.

Pre-tax annual profits at Jaguar Land Rover rose 11% to £1.67bn – a record high – and helped temper a 36% fall in profits at the company’s parent group, Tata Motors. Total world sales at Jaguar Land Rover were up 22% to almost 375,000 vehicles.

While happy with the success, C Ramakrishnan, Tata Motors chief financial officer said the company still sees “the external environment and overall economic scenario very, very challenging and [it] will remain stressed,” adding that this would have an impact on demand for its products.

Christian Stadler, Associate Professor of Strategy at Warwick Business School, described the results as “fantastic”. He believes that despite the views of Mr Ramakrishnan, he says JLR has benefited because its typical customers were not hit by the economic crisis “to the extent that they need to delay the purchase of a car”.

“They have added 8,000 jobs over the past two years and they target exactly the right customers at the moment: rich people in growing car markets like China, the US, and Russia.”

Range Rover Evoque
The Range Rover Evoque

“The new Range Rover Evoque model is a perfect example of this strategy. Offered as a two-wheel-drive version the model still has the looks and high-riding position of a 4×4. This allows JLR to charge a premium to customers who value the image of an off-road vehicle without ever needing its capacity.”

And Dr Stadler believes JLR’s announcement means the future for the UK car industry is bright despite the country’s economic woe.

“The outlook for the UK car industry is positive as historic weaknesses are no longer a major concern,” said Dr Stadler. “In a 2009 report the New Automotive Innovation and Growth Team was concerned about high labour costs, lack of skilled labour and tough environmental regulations. None of these are a great weaknesses today.”

Dr Stadler said he expects increased automation in the automotive industry to further reduce the impact of high labour costs, while a lack of skilled labour has reduced in significance “during the current recession as more engineers are looking for jobs”.

Furthermore he said that the tougher environmental regulations have now become an an advantage as “UK manufacturers are ready for customers who are concerned about issues like climate change”.

“On top of this manufacturers value the UK car industry’s labour flexibility – a notable difference compared to somewhere like Germany.”