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Luxury carmaker Jaguar Land Rover, owned by Tata Motors, is taking a series of steps to stem declining sales in China. Since the start of 2015, the company has seen a double-digit decline in China, which accounts for 35 per cent of JLR’s global sales.
And contrary to popular perception, the sharp decline in volumes is not entirely about a collapse in the stock market. A six-month delay in the launch of the localised Evoque, recall of the imported Evoque and activism by dealers have impacted JLR’s fortunes in China. In response to a questionnaire sent by the Business Standard, a JLR spokesperson said China’s automotive industry would see a “period of adjustment as the market matured” and that it was taking several strategic steps to mitigate dealer issues and restore brand salience.
Over the last four years, the luxury car market in China has grown at 25 per cent year-on-year, but analysts believe that JLR volumes would remain flat in 2015 and grow by a modest seven per cent in 2016, after faltering in China.
JLR’s sales have declined 20 per cent in the first three months of 2015 and another 33 per cent in the second quarter of the calendar year.
And contrary to popular perception, the sharp decline in volumes is not entirely about a collapse in the stock market. A six-month delay in the launch of the localised Evoque, recall of the imported Evoque and activism by dealers have impacted JLR’s fortunes in China. In response to a questionnaire sent by the Business Standard, a JLR spokesperson said China’s automotive industry would see a “period of adjustment as the market matured” and that it was taking several strategic steps to mitigate dealer issues and restore brand salience.
Over the last four years, the luxury car market in China has grown at 25 per cent year-on-year, but analysts believe that JLR volumes would remain flat in 2015 and grow by a modest seven per cent in 2016, after faltering in China.
JLR’s sales have declined 20 per cent in the first three months of 2015 and another 33 per cent in the second quarter of the calendar year.
The luxury car maker has been suffering from negative customer sentiments, following a recall of imported Evoque vehicles (2014 – 15 model year) over performance issues with the nine-speed automatic transmission. The customer ire also has to do with the heavy discounts dealers ran on the imported vehicles, prior to the launch of the localised version. This combined with the recall has eroded customer confidence and JLR is working to address this.
JLR’s woes are not restricted to the falling sales in China and negative customer sentiments. Luxury car dealers have come together to form an alliance in order to negotiate higher margins on JLR products. Explains Nitesh Sharma of Phillip Capital, “JLR is re-adjusting incentives for dealers, who have come together to form an alliance. That will give them more bargaining power while negotiating for higher margins, which means higher rebates from company.” Analysts expect margins to crack margins are also expected to crack in FY16 and fall to 14.5 per cent levels from 19 per cent at present, as discounts and margin renegotiations by dealers.
Confirming the move, JLR spokesperson says: “We are making a series of strategic adjustments across our business in China to ensure a sustainable and healthy business as we enter into a new phase for Jaguar Land Rover. As part of our business planning process, we regularly review our recommended pricing and sales targets to reflect current market conditions.”
