Luxury car and SUV manufacturer Jaguar Land Rover, which has weighed heavy on owner Tata Motors’ Q1 FY2020 numbers, is making moves to better its performance. As it advances on a major cost-cutting drive, it also recognises the need to be future-ready. Towards that objective, the Tata Motors-owned company is looking at striking new partnerships even as it faces some major headwinds.
Speaking at Tata Motors’ annual general meeting in Mumbai today, chairman N Chandrasekaran said: "The only way to handle this need for capex is additional investment through partnerships, because we want to spread the investment. There are many discussions underway from tactical to strategic."
This could mean the company could forge new connections with established automotive players globally or even with start-ups. Something similar to what global automakers like Daimler and the BMW Group are doing.
Addressing shareholders, Chandrasekaran also said that Jaguar Land Rover witnessed growth in China during July 2019, for the first time in a year. The market slowdown in China meant a sizeable drop in JLR’s volumes, between 40-50 percent. “But I'm hopeful because for the first time in 12 months, we are seeing a positive volume growth in China in July. Last month it recovered and this month it looks good. But we need to wait for a couple of more months to see whether there's a trend,” said Chandrasekharan.
Brexit impacting JLR's supply chain
Another issue impacting the luxury carmaker's future growth is Brexit. The danger and impact felt by automakers in Britain in leaving the European Union without a trade deal in place will be much more of Jaguar Land Rover than any other company.
“The real concern is if Brexit were to happen with a deal or no deal, what will be the impact on our supply chain? Jaguar imports millions of components from other parts of the world, particularly Europe into UK. In the situation of Brexit, there's a possibility of a supply chain breakdown which essentially means production cannot happen, inventories are to be maintained and some of the losses that we are seeing is also because we have to calibrate the supply chain,” said Chandrasekaran.
“Like any other auto company, JLR has to invest in future technologies to address the move away from ICE to hybrid and electric. It also has to invest in future models, make necessary investments in areas like shared mobility, and also beyond that. That's very important to stay alive in this ecosystem. All this means is there is a need for capital investment if you want to be future-ready.”
"During the past 12-18 months, we have cut down capex from around £4.5 billion (Rs 34,483 crore) to £3.98 billion (Rs 30,499 crore) last year. We are working towards cutting down further but we can't take a very drastic cut. These opportunities keep coming and we keep evaluating every one of these opportunities and as long as it is in the interest of Tata Motors, we will forge such partnerships so that we are able to address the capex,” said Chandrasekaran.
It may be recollected that Jaguar Land Rover’s CEO, Ralf Speth, has repeatedly warned of the damage a No-Deal Brexit could cause if cars made in the UK but exported to Europe carry a tariff, or if parts required to build cars in the UK are required to undergo border checks. He has estimated the potential cost to the firm to be up to £60m (Rs 510 crore) per day.
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