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Jaguar Needs To Be Ambitious, Embrace Luxury, And Move Upmarket To Thrive

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Jaguar’s fabled history means it has the potential to become an upmarket luxury brand, placing it just below the likes of Bentley and Rolls Royce with lower sales but much bigger profits.

That’s one of the possibilities arising out of the company’s perceived difficulties of competing and surviving in a cutthroat, post-coronavirus world.

Currently Jaguar is in a kind of limbo, with its sedans like the XE and XF unable to compete with the Germans, and its SUVs losing out to the specialized off-road ability of its own Land Rover partner. Range Rover is currently Tata Motors of India owned Jaguar Land Rover’s (JLR) most upmarket contender, but the Jaguar brand has the possibility of eclipsing even this proven money maker at the top end of the market.

That’s the view of academics and analysts, who also believe financially troubled Jaguar will still be with us in 5 years time, but probably not in a form recognizable today. They point to the strengths of the Jaguar brand, its sportiness and historical resonance. They reckon because Jaguar, even with its big brother Land Rover, can’t compete on costs with the Germans like BMW, Mercedes and Audi, it needs to generate scale to be able to compete on the world stage, and this means parent JLR must seek to tie-up with a bigger partner. It already has a partnership with BMW to produce parts for electric cars, but because of the debacle of its previous merger with Rover, the Munich-based company might not be keen to repeat the performance. This leaves possible partners like Groupe PSA of France, its compatriot Renault, or an emerging manufacturer from China. 

JLR has been suffering more than most automotive players from the existential threat posed by the fallout from the coronavirus pandemic. Jaguar was already in trouble before the virus struck and much of its target markets went into lockdown and auto sales lurched to a sudden halt.

Rationalize manufacturing

And JLR has been slow to rationalize its manufacturing and probably needs to close plants. The Land Rover operation needs to simplify its model range, while it needs to share more parts and components across the two brands.

JLR lost 422 million pounds ($525 million) before tax in the year ended March 31, after losing 3.6 billion pounds ($4.5 billion) in the 2019 financial year. Jaguar’s financial numbers were not revealed, but sales of its cars and SUVs worldwide rose 22% to 141,000 in the financial year. According to carsalesbase.com, Europe led the way with about 77,000, followed by North America, 31,000 and China 19,500.

In contrast, BMW’s total global sales in 2019, including Mini and Rolls Royce, hit close to 2.5 million. That’s the scale of the divide which JLR must straddle.

Another factor adding uncertainty to the mix is the fact that JLR is losing its CEO Ralf Speth who retires in September. That is likely to delay any big existential decisions on Jaguar’s (and not to mention Land Rover’s) future which had been expected in the summer. The Financial Times of London says the appointment might come within days.

Felipe Munoz, global automotive analyst at JATO Dynamics, said Jaguar needs space to find its own way and must embrace electrification, fast.

”First, JLR needs to give Jaguar more oxygen. Second, the brand must find its niche market; and third, the electrification race will make the difference. Jaguar needs to be repositioned as the luxury British brand, one step below (BMW’s) Rolls Royce and (VW’s) Bentley,” Munoz said.

“Cannibalization is a problem at JLR as all their SUVs compete with each other and Jaguar is always the one losing out due to lack of brand strength and identity. This has to stop. Land Rover is mostly known for its off-road vehicles, and more recently for its luxury Range Rover SUVs. However Jaguar could become the real luxury brand, while Land Rover would focus more on tough and high quality SUVs. I think the Range Rover line-up is now a referent in Land Rover, so it would complicate this strategy,” Munoz said.  

Lead premium electric market

Munoz said Jaguar has a chance to become a leader in the premium electric market with its I-Pace, although this will be very expensive with profits hard to come by. It would help Jaguar to appeal to younger buyers, but would take years before becoming profitable. Jaguar needs to stop making sedans, not least because the Germans have this segment covered. He doesn’t expect Jaguar to succumb to merger or take-over attempts by western manufacturers.

“Tata doesn’t want to sell Jaguar and Jaguar doesn’t want to be bought,” he said.

Professor Peter Wells, Professor of Business and Sustainability at Cardiff Business School said Jaguar’s image in the marketplace is unclear.

“It’s the uncertain position of the brand, that’s the core of the problems and its move into SUVs left people uncertain what they were buying, and there’s the quality problems,” Wells said.

JLR came second from bottom in the latest J.D.Power quality survey, ahead of Tesla TSLA though.

“Jaguar’s development has been chaotic, with many different owners and changes of direction, unlike the linear-smooth progress made by BMW. And it’s not small enough like say Maserati, but not big enough to get the volume required to survive, it’s stuck in a really awkward position and is in danger now as its burns cash. It has to do something about the sedan range,” Wells said.

The Jaguar XE is the smallest sedan, competing with the likes of the BMW 3-series. The XF is a BMW 5-series equivalent, while the top of the range XJ flagship is about to be re-launched as an electric vehicle.

Jaguar will survive though.

“In 5 years it is going to be a more rationalised business. There will be some culling of the product line, but it will still be here. I don’t think the Germans will want to buy into British auto again. But other parties could be interested. China; Jaguar has a strong resonance in China,” Wells said.    

Professor Stefan Bratzel of the Center of Automotive Management (CAM) in Bergisch Gladbach, Germany says it’s all about size.

Must build an alliance

“I’m wondering if it’s big enough to succeed as an independent player but it needs to cooperate or build an alliance with a bigger player. It’s more likely to be a Chinese partner, along the lines of Geely and Volvo; that’s more probable than a European brand like Groupe PSA or Renault. I’m not sure BMW will be interested after the Rover disaster,” Bratzel said.

Sweden’s Volvo is owned by Zhejiang Geely Holding of China.

“In five years time Jaguar (and JLR) has to find an alliance partner otherwise it will be getting really difficult for them,” Bratzel said.  

JATO Dynamics’ Munoz reckons in 5 years Jaguar will be leaner, more profitable and maybe making Bentley nervous.

“I think it will be a niche luxury brand with lower volumes but hopefully more profitable if JLR repositions this brand. It’s in the wrong segment now I’m sure of that,” Munoz said.

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