JLR CEO Ralf Speth has bet heavily on diesel - and now finds himself on the wrong side of technological history.
Gisela Schober Getty Images for Land Rover
By Geoffrey Smith
January 9, 2017

Britain’s biggest automaker Jaguar Land Rover (JLR) sold a record 583,312 cars last year, as a sharp drop in the value of the pound after Brexit continued the Indian-owned firm’s rapid expansion.

Sales were up 20% from the previous year, although sales growth slowed to 12% year-on-year in December, in line with signs in both Europe and the U.S. that a broad-based boom in car sales in the last five years is starting to flatten out.

JLR, which spent years in the doldrums before being bought by India’s Tata in 2008, has since invested heavily in new models and expanded production with plants in China and Brazil, with construction of a new site in Slovakia under way. However, the company was shaken up late in 2016 after Cyrus Mistry was ousted by the group’s family owners from his position as chairman of Tata Sons, the holding company that controls JLR and other parts of the conglomerate.

Sales of luxury Jaguar models rose 77 percent to 148,730 units in 2016 due to strong demand for a range of new high-end products including the F-PACE, the brand’s first SUV which was launched last year. Europe accounted for almost a quarter of total demand, making it Jaguar’s biggest market.

 

Like other automakers with a presence in Britain, JLR is concerned that the U.K. will choose one of the more extreme variants of ‘Brexit’ currently being considered, one that would leave the country outside the EU’s Single Market and subject to both customs duties and other controls. That could badly hit exports.

So far, though, the exchange rate rate has cushioned any Brexit-related shock. The pound has fallen by over 10% against the euro, more than the standard import duty that the EU imposes on car imports under World Trade Organization rules. WTO rules form the ‘worst case scenario’ for Britain’s relations with the EU if it fails to agree a more friendly separation agreement over the next two years.

The pound fell sharply again Monday, after Prime Minister Theresa May dropped her broadest hint yet that the U.K. would end up outside of the Single Market. May told Sky News at the weekend that the country couldn’t hang on to “bits of EU membership.”

 

JLR has other problems besides Brexit and the upheaval at the holding company to worry about. The company risks finding itself on the wrong side of technological history, being heavily dependent on diesel engines that are facing a global backlash in the wake of the Volkswagen emissions scandal. Almost all of JLR’s sales in Europe are diesels, as are 10% of its sales in the U.S.. The company has been slow to react to the shift in consumer demand towards electric vehicles since ‘Dieselgate erupted’. Lacking in-house expertise, it has outsourced production of its first EV, the Jaguar I-PACE, to Austrian automotive group Magna Steyr.

 

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