Jaguar Land Rover profits PLUNGE on poor China performance

[nggallery id=1752 template=customlinks]

Jaguar Land Rover’s profits have fallen in the last quarter with poor China performance offsetting a strong market for JLR in the UK, Europe and North America.

It seems that since Tata took Jaguar Land Rover from Ford for (what now seems) a bargain basement price, they have done little wrong.

We’ve seen an unbroken stream of sales and profits – mainly thanks to Land Rover – that improve with every new figure release. But not this time.

With profits of £2.6 billion on sales of £21.9 – and more than 460,000 cars sold – in their last financial year, China was JLR’s biggest market, but an economic slowdown in China has seen JLR’s profits plunge by almost a third in the quarter to June compared to 2014.

Revenue fell by 6.6 per cent to £5 billion, sales fell to 114,905 from 115,596, but it was pre-tax profit and EBITDA that suffered most, with a 30.9 per cent drop in profits to £638 million and 24 per cent drop in EBITDA to £821 million.

The figures are far from a disaster – at any other point in the history of Jaguar and Land Rover they would still be seen as remarkable – but what it perhaps does do is show us the future.

It’s arguable the China bonanza may be coming to an end for western car makers as the market matures, and it’s also arguable that JLR are selling more cars with lower margins, a trend that will continue with the Jaguar XE and Land Rover Discovery Sport, and mean JLR will have to sell a lot more cars to make profits than it did.

Maybe the honeymoon growth on the back of high-spec luxury cars that caught the Zeitgeist is over, and JLR now have the unenviable task of transitioning from successful niche maker to premium world player?

They’ve set the stage, let’s hope the Disco Sport and Jag XE are the players JLR need for a standing ovation from investors in the future, and that JLR are brave enough if they are to bring in new offerings to widen their appeal further.

And, while they’re at it, capitalise more on the top end Jaguar XJ, a car that seems to have gone from symbolising the re-birth of Jaguar under Tata, to relative obscurity. Such a shame, especially as margins on cars like the XJ – if JLR had done things better – are manna from heaven. Just ask Mercedes.