JLR looks to better sales momentum in Q2

After a weak operational performance in the June 2022 quarter that pulled Tata -JLR further into the red, it will take a while before the maker of the Jaguar and Land Rover brands hits all-time peak volumes of fiscal 2018 and 2020.

A report by ICICI suggests that JLR which clocked its record numbers of  545,298 units in FY 2018 and 475,952 units in FY20 could end the current fiscal with 362,777 units and 452,380 units in FY24, numbers better than FY22 and FY21.

JLR reported a 37 percent decline in retail sales at 78,825 units in the quarter ended June as a result of the continuing semiconductor shortage, COVID-19 lockdowns in China and new model transition of Range Rover Sport. JLR losses widened losses at the consolidated entity in the June quarter. Its net losses for the three months increased to Rs 4,951 crores from Rs 4,450.92 crore loss a year earlier.

The ICICI report suggests that the Tata-owned JLR will also benefit from the rationalisation of input costs and a favourable model mix. “We believe that wholesales of around 30,000 units per month in the coming months would be good for JLR to meet its GBP1 million FCF (free cash flow) guidance for FY23, with its FCF breakeven volumes being at around 25,000 units per month,” said the report.

At present, JLR has a robust order book of 200,000 units and dealerships have been able to lower their inventory. The brokerage is therefore optimistic about JLR being able to meet its volume target of 360,000 units for fiscal 2022-23. 

JLR losses widened losses at the consolidated entity in the June quarter. Its net losses for the three months increased to ₹4,951 crores from ₹4,450.92 crore loss a year earlier.

The company is also ramping up production of its Range Rover and Range Rover Sport and this could help JLR secure the volumes it needs in the September quarter. The run-out phase of these models had prompted a lowering of the production run rate of high margin and high-volume models to 6,000 units per month from 25,000 units per month. This in turn had pulled down the overall retail sales by 6 percent year-on-year. 

“With the production of these models gradually returning to normalcy (around 1500 units/week currently) along with their combined order book at 82,000 units, we believe the guiding figure of 90k units in Q2FY23 is achievable,” said the report.  

Additional sales boost is expected from China — one of JLR’s important markets as the market gradually opens up post-Covid. The China lockdowns impacted China's sales to the tune of  5,000 to 6,000 units in Q1.

"The binary impact of very low production on the Range Rover and almost zero production on Range Rover Sport is absolute which will progressively improve and the margins will increase as well,"  Adrian Mardell, CFO of JLR had indicated at the investor call after the Q1 earnings were announced.  

One of JLR's key weaknesses is it’s a limited presence in EVs with the Jaguar i-Pace being its only offering. That is set to change as JLR is planning three electric SUV crossover models as it metamorphoses into an all-electric brand by 2025.

Jaguar will make the three e-sports SUVs at Solihull, in the UK, targeting 50,000 to 60,000 units a year. The new models will utilise Jaguar’s own BEV platform Panthera, and are designed to break the £100,000 barrier in pricing.

Meanwhile, as part of its ‘Reimagine strategy’ Jaguar Land Rover is collaborating with tech startup Multiverse to enhance the data skills of its employees as it accelerates its digital transformation and prepares for an electric vehicle future.