Land Rover is the fountain of youth

Even as Land Rover celebrates its sixty-fifth anniversary — generally thought to be retirement age — the automaker is showing the growth of a Silicon Valley startup and posting income that must make its former proprietors weep. For the 3rd fiscal year running, Jaguar Land Rover (JLR) announced a profit of at least $2.3 billion, the price India’s Tata Motors compensated Ford for it in June 2008. Sales are up 22 percent, to 375,000 units. Property Rover makes up about 84 percent of group sales and all of the profit, according to analysts. Considering that JLR flirted with personal bankruptcy and begged for a bailout from the British government in ’09 2009, this is one of the most astonishing recoveries the auto industry has seen. So what went right for Property Rover? And had been Ford wrong to sell?

It seemed like the proper move at that time. Sources close to the sale reveal that not just a single main automaker showed interest. There were five private-equity companies and two Indian carmakers — Tata and small Mahindra — in the working. This was not a good time to be marketing a volatile vehicle company, especially one dependent on costly SUVs. If JLR got still been on the market when the financial meltdown struck just a couple of months later, “Ford would have closed it,” states Sanford Bernstein’s auto analyst, Max Warburton.

“The whole Tata deal was incredibly romantic,” Warburton continues. “The decision came from a guy — Ratan Tata — who just loved the history of the British brands. There is no operational synergy between Tata and JLR.”

It was hardly hanging around through 2009. JLR posted nearly $500 million in losses, and Tata tried to obtain a loan from the U.K. authorities. Ford CEO Alan Mulally must have been Google-translating caveat emptor from Latin to Hindi.

“It had been tight, about as restricted as it gets at an automobile company,” a previous JLR executive told us. “We were playing for time, doing everything we legitimately could to help ease the cash flow. We had a hard time meeting the payroll.”

Then the profits graph started to march upward: a small income in the fiscal calendar year that ended in March 2010 followed by colossal profits another three years. What happened? Well-received services helped: the Evoque rapidly became Land Rover’s best seller, helping to boost sales in all markets, even shaky European countries, where Property Rover grew 18 percent this past year. But China’s unexpected discovery of SUVs is easily the biggest reason for Land Rover’s riches. China became the brand’s biggest marketplace this season: sales there rose 48 percent after growing 76 percent the entire year before.

More positive indications lay ahead. The brand new Range Rover hasn’t however made a complete year’s contribution to underneath line, and we’ll shortly see a long-wheelbase version aimed squarely at China’s chauffeur-driven market. The new Range Rover Sport is really a much better alternative to a model that was Land Rover’s most rewarding and — after the Evoque — its biggest seller, despite its high cost. It will get yourself a downsized 2.0-liter turbocharged four-cylinder, again targeted at China, where it wins a tax crack. The roads of Shanghai will be thick with them.

So Property Rover is saved, correct? Not entirely. Property Rover has been greatly aided by the weak British pound, that could recover. And although China is still growing, the rate is slowing and its own government can be cracking down on conspicuous consumption. In the last quarter of fiscal year 2012-13, Land Rover’s sales there have been up “just” 13 percent. Land Rover wouldn’t be Uk without that minor frisson of monetary peril.

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Some thoughts and opinion from Chris Ilson

After glancing at this article I get the sense that once Land Rover as a brand got into the Chinese market the profits started rolling in.  But there was a slightly hidden message, Land Rover showed real innovation with the Evoque.  I think deep down that is what most people want, something new instead of something commonplace.



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