Dr Ralf Speth, Chief Executive Officer, Jaguar Land Rover, speaks to Hormazd Sorabjee on the future of diesel, why the internal combustion engine will continue to play a key role in modern mobility, investment and expansion plans.
On the future of diesel engines
I am convinced that, for us, diesel will play a role in the future. A few automakers have said they are stepping out of diesel completely. It would be a pity if this impacts the development of diesel. Although hybrid and electric vehicles will play a very important role in the future, no one can make the transition over a weekend.
We also have seen that modern, high-tech engines, internal combustion engines are a good choice. It is predicted that by 2025-2030, around 20-30 percent of vehicles will be electrified. That sounds like a lot, but it also means 60-70 percent vehicles will continue to use an internal combustion engine. So, the internal combustion engine will have a big role to play in modern mobility.
If you look at modern high-tech engines, diesel has several advantages; it’s better from a fuel consumption point of view, the CO2 emissions are 20 to 30 percent lower, and there is a solution to reducing the NOx with modern technology.
With Adblue, NOx is not the big issue anymore. So, facts and figures should be put on the table and governments, environmental groups, journalists, and automakers should sit around the table and create the right platform for future mobility.
On the impact on profitability due to investment in internal combustion engines and electric cars
Developing internal combustion engines as well as electrics is a challenge. Apart from the fully electric i-Pace and the hybrid Range Rover and Range Rover Sport, we also have to refine the conventional internal combustion engines, which stretches an organisation unbelievably, and margins will be impacted. Because, at the end of the day, let’s say you have a certain period of time until everything is settled, to understand the costs coming out of the infrastructure, and the kind of connectors required to set-up charging. That means you have to prepare for everything because everybody expects the car to have everything. It’s a question of manpower, of skills, but also quite clearly, at the end of the day, of money.
On the strategy for investment and expansion this year
In the current financial year, we are going to spend 4.3 billion pounds (Rs 42,325 crore). It’s quite clear, the investment is high as we are committed to spend overproportionally, because we are still in a catch-up mode since other carmakers have developed a critical mass of volume and they have more facilities.
We sold around 600,000 vehicles last year, while others sold millions of cars. They’ve had 20-30 years to achieve this level and, therefore, we cannot catch up so soon.
We are going to start a new plant in Slovakia which will go on stream this year, we have expanded a little in India, and we have expanded in China and South America.
On addressing gaps in the model portfolio
Overall, there are white spaces wherever you look, not just in the lower segments but also in the segments we are currently operating in. Take for instance the 3-series segment. We have one car, the XE, while BMW has the 3-series, 4-series with a coupé, convertible, sport brake and a GT version.
So the key question is: do you expand the current segment you are in and offer the customer another alternative? Or, do you step down and then attract completely new customers? So, we have a lot of opportunities and we are evaluating them.
On the growth of the joint venture in China
In China, the JV is a very good development. It was absolutely the right decision to go there and absolutely the right decision at the end of the day to produce there. We are delivering not just the Evoque or the Discovery Sport for China, we also have developed an XE LWB and an XF LWB – fantastic vehicles which also improve the image and expand the product portfolio of Jaguar in China.
So it’s a very interesting market, GDP growth is stabilised, car market – especially the premium car market – is overproportionate to the normal market, so we are in a good position there.
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