Jaguar Land Rover Books its Biggest-Ever Annual Loss. Sales Collapse in China

China deliveries in its fiscal year: -34%. And not getting better: in April, -45%.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Britain’s largest automaker, Jaguar Land Rover (JLR), owned by  India’s Tata Motors, plunged £3.6 billion into the red in its fiscal year 2018, ended March 31, as the financial fallout from slumping Chinese demand and sinking diesel sales in the UK and Europe took its toll. It was the company’s biggest ever annual loss. Global retail deliveries fell 5.8% to 578,900 vehicles, and global revenues fell 6.1% to £24.2 billion.

Investors in Tata Motors had already been expecting the worst, because the worst of the news had already been telegraphed in February, when JLR posted a gargantuan £3.4 billion loss for the third quarter of its fiscal year that included £3.1 billion in write-downs. And in January, it had announced layoffs of 4,500 employees, of whom 4,000 would be in the UK.

The decline in sales was “due to China,” JLR said. In China, until recently JLR’s fastest growing market, deliveries plunged by 34% from the prior year, to just 98,900 vehicles. The company is now on its fourth consecutive quarter of declining Chinese sales. If anything, the trend appears to be worsening: in April, JLR’s deliveries in China collapsed by  45% from a year earlier.

For decades, China has been a boon for global automakers. Every year since 1990, annual sales have gone up, often by double digits. Between 2005 and 2017, new vehicle sales multiplied by a factor of six, propelling China to pole position as the world’s biggest car market. But that multi-decade trend came to a shuddering halt last year as light new-vehicle sales fell 4.1%, to 23.7 million units. Since July, China has registered 10 straight months of declining registrations.

The reasons for the slowdown are myriad — from slowing economic growth and declining consumer confidence to the escalating trade war between China and its biggest trading partner, the U.S., and simple, good old-fashioned market saturation — but the effects for global automakers are plain to see.

To reanimate sales, some have begun offering cheaper prices while the government has introduced tax cuts to spur consumer spending, but to little avail. The juiciest discounts are being offered by premium producers, such as JLR, as they try to offload their most expensive vehicles, but so far with disappointing results. Between January and March, registrations of JLR’s two biggest selling premium segments, SUV4 and SUV5, fell 19% and 15% respectively, even as retail prices dropped.

But in two of JLR’s three biggest markets, the U.S. and the UK, sales are rising, though not nearly enough to offset the shrinking sales in China.

In the U.S., now its largest market, registrations rose 8.4% last year to 139,800 units, almost double the number of registrations in 2014/15. The Land Rover division is clearly benefiting from the broad switch from cars to trucks and SUVs. US sales now accounts for 24% of JLR’s global sales.

In the UK sales were up 8.1%, to 117,000 vehicles, while in the rest of Europe they slipped 4.5%, to 127,600 vehicles.

In these markets the challenges facing JLR are also steep. In the EU and the UK uncertainty around Brexit, diesel regulation, and the possible introduction of C02 taxes could take a heavy toll on vehicle purchases. In the U.S. there’s the risk of import tariffs being imposed on European automakers. And like all automakers, JLR faces the rise of the electric vehicle; it is frantically pouring funds into developing all-electric, PHEV and MHEV models. Last year saw the launch of its all-electric Jaguar I-PACE.

But time is of the essence. JLR is still heavily exposed to the fast-shrinking diesel vehicle market. And in March, S&P responded to the announcement of JLR’s “one-off” £3.1 billion write-down by downgrading the firm’s credit rating one notch from BB- to B+, four steps into junk, considered “highly speculative.”

JLR responded to the downgrade by promising improved financial results in the fourth quarter. And so now, for Q4, it reported a pre-tax profit of £120 million and cash flow of £1.4 billion. The company – which employs around 40,000 people in the UK — puts this improvement down to the efficiency gains resulting from its decision in January to ax 4,500 jobs and shift production of its Land Rover Defender to an assembly plant in Slovakia, where it cashed in €125 million of investment aid from the Slovakian government. By Don Quijones.

Tesla is steeped in chaos — and chaos is absolutely the opposite what a complex manufacturing, distribution, and retail operation needs. Read…  Carmageddon Sinks Tesla’s Bonds

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  22 comments for “Jaguar Land Rover Books its Biggest-Ever Annual Loss. Sales Collapse in China

  1. Alex
    May 21, 2019 at 3:08 pm

    Isn’t it pretty obvious that Chinese auto sales are collapsing because consumers are holding out for supply of the Tesla Model 3? When Gigafactory 3 is up and running, those big oil shorter trolls are in for a nasty surprise!
    Just kidding.
    My subtext is that no, China will not fuel a turnaround for Tesla either.

    • nicko2
      May 21, 2019 at 3:54 pm

      Yup…. In the age of trade wars, the Chinese will be patriotic and buy made in China.

      • Paulo
        May 21, 2019 at 5:38 pm

        China makes a simple 4X4 without all the frills and bling that reminds me of the old days. I researched them pretty extensively as an alternative to the high priced electronic crap on the roads, today. Basically, it’s a civilian model of what their army uses. Unfortunately, I could not get one in Canada. The Land Rovers of old were awesome, underpowered, and no frills. I learned to drive on one when I was 14. :-) Nowadays, the Land Rover starts at 80K +.

        Chinese alternative: https://carbuzz.com/news/china-claims-this-is-the-world-s-most-reliable-4×4

        • Mike Bryamt
          May 21, 2019 at 7:02 pm

          ‘Apparently, recent test scores rated it seven times more reliable than the Mercedes’

          I am assuming that’s a compliment?

        • Prairies
          May 21, 2019 at 11:44 pm

          It is likely reliable but safety standards and emissions standards are the rulers of the auto industry in the west and in Europe and this 4×4 likely makes them unhappy so they ban hammer it.

        • Leser
          May 22, 2019 at 2:08 am

          Safety & environmental standards = what trade barriers and tariffs are called in polite society. There is no fair trade, it’s rather a matter of PR effort and controlling the media narrative.

          Some years ago a Balkan country allowed new cars with the EU crash safety standard from 2 iterations ago. The result was that car prices on the lower end were drastically more affordable.

      • DV
        May 23, 2019 at 7:39 am

        Exactly, this is now an Indian-owned brand made in UK. What else one would expect? Brits should expect as much retaliation from China as there could potentially be out there.

    • WES
      May 21, 2019 at 8:03 pm

      Alex: I completely understand why my toaster and smoke detector are in love.

      However I can not for the life of me understand Tesla’s Auto pilot’s love for “parked” red fire trucks!

  2. qt
    May 21, 2019 at 3:25 pm

    China’s wealth effects for the last 30 years is their housing bubble. Now it’s burst so don’t expect another miracle…. printing press will go into overtime and it’s diminishing returns at this point.

    http://news.trust.org//item/20190521002754-vo1l5/

    • nicko2
      May 21, 2019 at 3:55 pm

      Property prices are down around 30% in Dubai, now there’s a bubble.

  3. Senecas Cliff
    May 21, 2019 at 5:36 pm

    Or is it just that the slow learners are finally realizing that JLR’s stable of vehicles is some of the most unreliable ever. This has been common knowledge in the U.S. since the 60’s but a short period of ownership by the Germans convinced some gullible people that things were different. And perhaps they were for a while, but when Tata took over they made it their mission to return the brand too its previous rattle trap status.

    • char
      May 21, 2019 at 10:57 pm

      Germans? Ford owned them before Indian Tata

      • May 21, 2019 at 11:53 pm

        Ford bought Jaguar. BMW bought Rover. Tata bought both. So yes, and yes :-]

    • MC01
      May 22, 2019 at 2:57 am

      The demise of the British automotive industry is a classic case of victory having many fathers but defeat being an orphan.
      For decades executives have blamed HM Government, former ministers have blamed the unions, unions have blamed unfair foreign competition… but as Jeremy Clarkson rightly said “I blame all of them”.

      As a mercifully former owner of British motorcycles I can attest besides the appalling reliability (normal before Honda entered the fray) one of the problems classic manufacturers such as Norton and AJS struggled with was a very high center of gravity (COG) which made their 60’s bikes handle like those from the 30’s. Designers were made aware of this issue by test riders and customers but completely failed to address it despite this issue being given the highest priority (at least according to Bert Hopwood’s memoirs).
      To give an idea of the general chaos in the British industry nobody had the idea of going out and buying a Honda or a BMW to take it apart, a routine practice in the industry. Villiers, for decades the largest two-stroke engine manufacturer in the world, remained blissfully unaware of the progresses made by their competitors worldwide, and this was in spite of receiving DKW R&D material at the end of WWII which was well in advance of anything they had.
      The mentality was worst than staid: it was complacent.

  4. Wilma
    May 21, 2019 at 7:03 pm

    So, a Land Rover is really a Slovakian car produced by an Indian company?

    I’ll have to remember that the next time I see someone getting out of one acting all snooty.

    And surprise, surprise, surprise, the Chinese figured out before the Americans that these luxury vehicles were really just overpriced Slovakian cars.

  5. char
    May 21, 2019 at 11:00 pm

    European sales include pre-loading for Brexit day (canceled for March 29) so real European sales were even worse.

  6. MB732
    May 22, 2019 at 7:13 am

    Wow am surprised JLR sales are still on upswing in USA. Will end soon and spectacularly.

    LR TV ad has woman pushing button inside the rear gate of her vehicle to lower the height of the back end so her dog can jump in. Can’t wait to see all the ass-draggers in 5 years wanting a $2000 fix of that feature…

  7. Robert
    May 22, 2019 at 10:46 am

    With the recent news of Chinese filmmakers doing remakes of the most inflammatory anti-American war movies (forget The Good Earth), news videos of Tesla drivers being stoned would not surprise me one bit- a very difficult time for any ex-colonialists to be exporting there.
    Coming soon to your local theater: Chinese re-make of Godzilla featuring an orange-haired monster.

    • Mike G
      May 22, 2019 at 3:54 pm

      The Chinese can do jingoistic militarist schlock movies that make Rambo and John Wayne look subtle. Check out Wolf Warrior II.
      Nationalism is an ugly disease.

      • Saltcreep
        May 22, 2019 at 6:33 pm

        Peak jingoism is yet way off, I reckon. Drop civilian automotive companies, go long jingoism, and buy arms manufacturers, security firms and anything that smells of MIC if you want to join in on the profiteering.

    • fajensen
      May 23, 2019 at 3:35 am

      Chinese re-make of Godzilla featuring an orange-haired monster.

      I’d watch that! I am a sucker for really bad movies.

      They could remake “War of the Gargantuas”, featuring “evil monkey” versus “good monkey”. If China could faithfully replicate the not-so-special effects from the Tojo films, it would be an instant classic too.

      Godzilla is usually the “good monster” who fights off one or more bad, monsters. The Godzilla formula of: “Epic monster fight causing massive collateral damage, while both are being shot at by an ineffective army”, would not probably not work in China.

  8. Kenny Logoffs
    May 22, 2019 at 2:55 pm

    All the ‘rich’ people rent them any way.

    Used values will crash though, and used buyers will still avoid without a warranty.

    No doubt it’s cheaper to buy a new one on finance at 0%, with a warranty, vs used at higher % borrowing and needing to buy a warranty.

    I’ll admit they’re (were) nice cars for their niche, if you’re a farmer and need to tow heavy trailers, and do long distances, and be comfy and fit lots of fat adults etc.

    All that said they’ve been slowly degrading most models true off-road/agricultural utility, and replaced it with expense and fragility to cater to the fickle fashion market.

    Now the fashion is moving on.

    I’ll also agree about complacency in the UK.
    It’s rife in the bigger corporate dinosaurs, or established businesses who think they’re safe.

    It’s a mentality that seems to be mostly celebrated throughout the workforce too.

    Small and newer companies have mostly seen the wind change and adapt.

Comments are closed.