Jaguar Land Rover: China Turnaround

What do you think are the major drivers of the 42-45% decline in unit volumes year on year to Q1?

There are several factors. We could say that one factor is due to the strong competition of the premium auto market. You can see this year the other rivals, especially the major premium auto OEMs, are introducing more and more new and refreshing models. For instance, this year Benz released 15 new models. BMW will release 21 new models. Audi, this year, are going to release 18 new models. So you can see that major premium OEMs have a very fast release rate of new models in order to gain market share. From this point, you can also see that the competition in the premium auto industry is fierce. This is the first point.

The second factor is the price decrease of the premium auto brands. This year, beginning April 1st, the central government in China has decreased the value-added tax rate from 16% to 13%. After the release of this policy, each premium OEM decreased their price immediately, including Benz, BMW, Audi, Volvo, as well as JLR. Each major premium OEM responded quickly and took quick action in decreasing their prices so as to gain customers and market share. So the second factor is this price decrease. Not only because of the value-added tax decrease, but also, for the major premium auto brands, their entry price is already lower than 200,000 RMB per unit. In the past, 200,000 RMB per unit was the price of a middle class, not a high brand or luxury brand, but now for the luxury brand, the premium brand the price is already lower than 200,000 RMB per unit. Due to the strong competition, each premium auto brand has decreased their price in order to gain market share.

The third point is due to the quality issue. This is also important for JLR. Why has JLR had a sharp decrease during the previous year? I think it's the accumulation of complaints, especially complaints around the quality, that have affected and lessened the trust of consumers, not only the existing consumers of JLR, but also their potential consumers. People will talk with each other, the news of the quality complaints was spread widely, on the internet, on the TV and so on. This accumulation of quality issues has been building for quite a long time, and finally it has broken the camel's back. So there has been a sharp decrease in JLR’s sales volume in China. In the past year, the market for the premium auto industry still has increased rates of sales, which is approximately in the region of 15% for the past year, but for JLR there has been a decrease of 50 to 60%. So you can see the sharp contrast between the different OEMs in the premium industry. So the third factor is the quality issue, which JLR did not pay attention to, they didn’t highlight it for quite a long time. Finally, the anger of the customers has accumulated with everybody complaining and wanting to take action and so on. These are the major factors of the sharp decrease in sales for JLR.

What’s the list price of an imported Range Rover today?

Currently, the price ranges from around 600,000 RMB to 1.2 million RMB. It depends on the different versions and the location of the brand. Effectively, the price is still much higher than the low cost JLR vehicles such as those produced by Chery/JLR.

Still, the imported Range Rover is also affected by the three major factors that we just discussed, such as strong competition, price reduction of the other brands, and quality issues that have affected the vehicles for quite a long time.

What has the change in the list price of the imported Range Rover been? What was the price two years ago, for example?