Jaguar Land Rover: Challenges in the Dealer Network

Could we just talk about the dealer network because JLR had issues in their dealer network, in the lack of dealer profitability. I think that Audi and BMW had the same issues 5-6 years ago where they had to pay the dealers rebates. Could you explain the difference in the structure of the networks of JLR versus the bigger competitors?

The major difference is that the JLR dealer network is much smaller in number than the major premium auto brands, such as BBA. From this point, it’s harder for the OEM to expand quickly in the market, due to a smaller number of dealers in the network. Also, in the past, JLR have put a lot of pressure on their dealers to store their cars in their warehouses, which takes up a lot of the dealer’s currency flow. Recently, they realised this problem because many dealers do not want to cooperate with JLR as they’re losing money. Now that they have realised this problem, they are trying to produce models according to market demand. This way they reduce current stock in their dealers. They have achieved some of this already. This year, the stock of the dealers has been reduced by around 45% in their warehouses.

Why do you think that the stock of dealers has reduced so much in Q1?

JLR are now producing and delivering the models and the vehicles exactly according to the market demand, which means they are producing the vehicles exactly according to what is needed in the market. That’s why there has been a sharp decrease in the stock in the dealers’ warehouses.

Aren’t JLR also backstopping the profitability of the dealers?

Yes.

What was the major issue in the dealers not earning money from JLR brands, was it because the Jaguars were not selling?

Yes, that was a major problem. The consumers didn’t want to buy the car but they were still being stocked in the dealer warehouses. In order for those cars to not be obsolete, the dealers sold them at a very low price.