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Jaguar blames reduction on Brexit - but business strategy is a root cause

Editorial Staff

Tata's Jaguar Land Rover has had an amazing run: it's profits have been spectacular and it has produced (admittedly having inherited some excellent work from Ford which sold the company on the cusp of it turning around) some excellent cars. But it's had to cease production of its iconic Defender Land Rover (the company says that to keep it abreast of changes in regulation was not feasible) and it's alienated some of its core - and amazingly loyal - customer base. So, as a luxury car maker which makes some extraordinarily competent vehicles that farmers and soldiers don't want (would you take a power washer to the interior of a Range Rover? Of course not) it's also made a blunder of epic proportions.

If you read the used car ads in the UK there's something remarkable: Jaguar saloons are everywhere and they are remarkably inexpensive, despite the new cars being anything but cheap. Checking the adverts shows something equally remarkable: it's almost impossible to find a petrol powered saloon. They are almost all diesel powered. Reports suggest that as many as 90% of Jaguar saloons sold in the UK in recent years have been diesel powered

That might not matter so much except that cars that are more than two years old are probably not Euro6 compliant and that means there are significant penalties to be paid by owners. That's an EU, not a Brexit issue. It also means that cars that are only a little over two years old are seeing values fall off a cliff. A three year old XF 2.2 Turbo Diesel, barely out of nappies in luxury car terms, costs only GBP15,500, about the same as a new hatchback: https://www.autotrader.co.uk/c.... The equivalent car, new, costs around GBP35,000 today.

That reflects catastrophic depreciation and while many such cars in the UK will be financed on two to three year leases, someone, somewhere is losing more than 50% of the price over a very short period. In fact, it may be that the car will lose relatively little in the next three to five years, making a low mileage, well maintained vehicle a far more economical purchase than new.

Jaguar is, to a degree, being beaten by its own success: it has sold far more cars in the UK in recent years than in the past and its sales in other countries have boomed, too. But despite its connection with Google's automated car company and development of electric vehicles, it remains locked into cars that many people are now suspicious of. After all, those who took a three year purchase or lease agreement in 2015 would not have expected to find the running costs of their car hugely affected by new policy-driven taxes. And those taxes have nothing to do with Brexit.

Jaguar have said that as the fixed term contracts of staff expire, they will not be renewed putting around 1,000 people out of work. A further 350, approx, will be moved between plants. While Unions decry that business model, it makes a great deal of sense for employers to be able to determine staffing levels based on the needs of the business. These are not the much criticised "zero hours" contracts and the two should not be confused.

Jaguar needs to work on producing economical hybrids, be they diesel or petrol fuelled and they need to work on developing a replacement for the Defender and to do that quickly. That, however, is not on the cards: the company's management has disassociated it from the one thing that put its badge in every village in the UK and in many overseas. There is no reason have developed the Jaguar SUV: the market is saturated. But the rugged 4x4 market is virtually empty now and the it seems a remarkable waste of a brand that the only place the Land Rover badge is seen is a small logo hidden somewhere on a Range Rover.

But that's not about Brexit: that's about management making decisions that may or may not be good in the long term.

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