When an Indian saved a British icon
The brands Jaguar and Land Rover have exchanged many hands over the past century. Born in different decades, like two children who were orphaned, they became siblings under the foster care of British Leyland in 1968, only to be separated. However, they reunited under Ford in 2000. Now, Tata Motors is the Indian parent supporting these quintessential British marques. It truly has been a tumultuous journey for them. Here’s looking at the history of these two car brands and their growth under Tata Motors.
The Jaguar story
Beginning as the Swallow Sidecar Company in 1922, the company changed its name to Jaguar Cars in 1945. Although, the breakthrough for Jaguar came in the fifties and sixties with its sports variants C-Type and D-type, the brand became synonymous with luxury saloons over the years. While it had made a mark for itself, the company lost some of its value after its merger with British Motors Corporation Limited in 1966, and later, with British Leyland in 1968. Nationalisation of British Leyland in 1975, led to poor quality.
Within five years of being privatised again, it was bought for $2.38 billion by Ford, who pitted Jaguar against Audi and BMW. In this process, they created a smaller, cheaper version of the Jaguar X-type, with underpinnings of the Ford Mondeo. This wasn’t well-received. Ford ended up cutting jobs and production, as the demand slacked in the US and British luxury car markets due to the recession. This didn’t help much either.
When the acquisition by Tata Motors happened ten years ago, Jaguar had been bleeding money for two decades. And in the background of the weak dollar, coupled with slumping sales, the American company had no other choice but to amputate their British limbs, at half the cost at which it had acquired them.
Land Rover’s journey
Said to have been inspired by the Jeep, the Land Rover was designed in 1948 by Maurice Wilks, chief designer of the Rover Company. It later merged into the British Leyland Corporation in 1968. Following British Leyland’s financial problems and nationalisation, Land Rover was established as a separate company under the umbrella of British Leyland and continued so later under the Rover Group. In 1994, the Rover Group was acquired by BMW. And doing justice to its name, it didn’t remain under the BMW ownership also for much longer, being acquired by Ford in 2000 for approximately $3 billion.
Unlike Jaguar, Land Rover was profitable for Ford to some extent. But in the face of bankruptcy in 2007, it decided to sell off both the foreign holdings together. And Tata Motors took over from there. On 2nd June, 2018, Jaguar Land Rover Limited (JLR) completed a decade as part of the Tata Motors family.
A decade of downs and ups
Tumultuous beginnings
Much as anyone would like to believe, it wasn’t a smooth sail immediately. As things were looking up for JLR, the impending storm of the Lehman Brothers collapse hit them hard. Within months of the acquisition, banks, markets and entire countries were in financial crisis. All premium car makers were hit badly. Sales of Jaguar Land Rover fell by a third in the first year, costing Tata Motors around £1.2 billion. It wasn’t to their liking, but 2,200 employees were laid off and production of the X-type was stopped.
Would Jaguar Land Rover have survived if Tata Motors had not bailed them out at the right time? Most experts believe, it wouldn’t have.
Tata Motors had pumped in around £1 billion into JLR in the initial stages. If a private equity firm had gotten hold of the marques, it would have off-loaded many more employees and shut production plants. General Motors let go off Saab, and it didn’t survive the storm. It was the commitment of Tata Motors that held JLR through the rough years.
In 2009, they tried to raise funds from Government loans. But the British government was wary of lending to the company in the scenario of shrinking global markets for luxury cars. Negotiations lasted for months, and speculations were high as to the fate of Jaguar. But Tata Motors managed to raise £500 million from private funds and the European Investment Bank. And in the financial year 2009-10, the clouds started parting for Jaguar as every quarter advanced, losses reduced, converting to gains and they recorded a profit of £1.1 billion in the following year. By 2011, they had rehired staff at the Halewood plant and built another plant to manufacture engines.
Silver lining
Added to the achievements was their expansion to China, the world’s biggest car market. After a joint venture with Cherry, JLR set up manufacturing units in China which started operations in 2014 with the Evoque. And whatever the company made with the sales abroad was invested in Britain for R&D. In 2014, the company set up the National Automotive Innovation Campus at the University of Warwick to create a new generation of vehicular technology. JLR invested a total of £1,411 million in research and development in the year ended 31 March 2015.
In 2017, opened its first overseas engine plant in China to manufacture the all new Ingenium 2.0 litre four-cylinder petrol engines, demonstrating its long-term commitment to the Chinese market. And in 2018, JLR also announced a long term strategic collaboration with the US- based Waymo to develop the world’s first premium self-driving vehicle. The British manufacturer has already developed an all-new battery-electric platform for the same, which they will be integrating with Waymo’s software.
Ratan Tata: the man behind it all
Ratan Tata’s patience and trust in the management appointed by him played a major role in saving this iconic British brand. He took time in the due diligence and in getting to know the company, appointing people with vision, and ultimately leaving the day-to-day decision making to them. This is unlike most Indian parents, who are totally involved (read interfering). Ironically, Ford, being American, was like that. In a recent press conference, Dr. Ralf Speth, the CEO of Jaguar Land Rover spoke about the company’s journey in the last 10 years. He said that JLR sales have tripled, and so has their workforce. The turnover, now is five times that of what it was in 2008. Currently, JLR cars are available in 160 markets the world over, with operational footprints in Austria, China, Slovakia and India. He, too, credited the vision and belief of Ratan Tata for their success.
The road ahead under Tata Motors
Challenges
While they are celebrating ten years of their profitable partnership, Tata Motors and JLR are also preparing for a tough road ahead. With Brexit and the latest taxes on diesel vehicles in Britain, there is a lot of uncertainty. European markets will remain a challenge for a few years. Although, P. B. Balaji, CFO of Tata Motors, said that from a red situation in Europe they have moved to an amber. Growth in the U.S. has also been slow for JLR. But the major concern for the company will be quick and large-scale electrification of models. The company aims to have an electric variant for all car models by 2020. The electrification of vehicles could impact profit margins in the long run though. They will have to cut down costs to drive operating leverage to make better profits.
Land Rover, remains a profitable business, with the SUV segment booming. However, they will have to work on reducing costs for Jaguar.
Innovation and investment in R&D will be the mainstay of JLR. The revenue has grown 11% (without translation) for the Tata Motors family in this FY, with only 3% growth coming from JLR. The company did launch five new models last year. So the impact of their sales will be visible in the new year. And the refinement of their product portfolio, with hybrids and electric cars, the British manufacturer will be restructuring for sustainable growth. They seem to be well-positioned for further growth, geopolitical market withstanding.
A bright future
In the recent years, Jaguar Land Rover has received various awards. It received Car of the Year and Car design of the Year for the F-Pace. Their revenue went up by 6% in the last quarter of the FY 2017-18. The EBIT (Earnings before interest and tax) was at 6.7%. Tata Motors will be investing a further £4.5 billion in JLR in the coming financial year. In the long term, they plan to incorporate Autonomous Connected Electric and Shared vehicles to their portfolio. With a rich pipeline of plans for electric vehicles like the I-Pace, the first premium electric SUV, JLR should be able to grow. Even if the economic uncertainty in Britain prevails, China will remain a lucrative market for the British cars. And Tata is a brand known for stability; it will not give up on it’s adopted child easily.
