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Jaguar Land Rover to Boost Spending by Half

04 July, 2011

Jaguar Land Rover is to boost its spending on products by 50 per cent from about £1bn ($1.6bn) to £1.5bn as the UK’s largest premium carmaker prepares to launch the most important vehicle since Tata Motors bought the group from Ford Motor three years ago.

Production of the Range Rover Evoque, the first all-new vehicle developed since the $2.3bn (€1.6bn) acquisition and the smallest yet to be produced by a marque known for big off-roaders, will start on Merseyside in the UK on July 4.

The product offensive comes amid sharply improved profitability at JLR, which is riding high on buoyant global demand for premium cars, and plans to roll out 40 new or upgraded vehicles and engines over the next five years.

The group reported profits after tax of £1.04bn for the past financial year, lifting the fortunes of its Indian parent, which had to pump more than £1bn into JLR to keep it afloat during the financial crisis.

JLR’s profit margin of 11 per cent – helped last year by a weak pound – puts it in a league with Germany’s big premium producers BMW, Mercedes-Benz and Audi, which have also recently reported high single-digit or double-digit returns.

Furthermore, at a time when other big British companies are reducing graduate recruitment, JLR is hiring 300 graduates, which is its largest intake ever and who are due to join the company in September.

It is also in the process of hiring 1,000 engineers.

But while JLR is enjoying rising sales and good reviews for its vehicles, it nevertheless faces tough competition from its bigger German competitors, which can outspend it on R&D. JLR is also still searching for a manufacturing partner in China, the world’s largest car market.

BMW and Mercedes sell more than 1m vehicles a year, compared with the 250,000 or so, Jaguar and Land Rover sell.

Ralf Speth, the German veteran from BMW and Ford who became JLR’s chief executive last year, said that the UK carmakers had no aspiration to match Germany’s premium carmakers on volumes, but could remain competitive because they specialised in profitable vehicles at the top of their respective segments.

“Whenever we have the right vehicles with the right product substance, the profit will come automatically,” he said.

The Evoque represents a departure for Land Rover, which is aiming to attract more female, urban and other consumers who would never have considered the brand before. Victoria Beckham, the celebrity wife of David Beckham, the footballer, is serving as the car’s “ambassador”, and designing her own special edition Evoque.

“We’re not just a manufacturer of four-by-four products,” Gerry McGovern, Land Rover’s head of design, told the Financial Times. “We’re a manufacturer of luxury goods”.

Jaguar, whose client base has aged in recent years as it produced cars criticised as excessively stuffy or retro, is seeking to rejuvenate its design. “In 10 years’ time, I’d like it to be the coolest brand in the car business,” said Ian Callum, Jaguar’s design director.

 

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Jaguar Land Rover to Boost Spending by Half

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