Jaguar Land Rover: Risks of Promotional Activity

So, historically, you pretty much had the JLR profits from the Chinese region being driven by one car, and that's the imported Range Rover?

Pretty much all the Land Rovers. It was the Evoque, it definitely was the Range Rover Sport. But Evoque and Discovery were also making way more money than they were anywhere else in the world. They were making decent money for the retailers as well. The big Range Rover is the Daddy of all that, but Range Rover Sport itself was also making very good money in a higher volume.

Just to bring it back to recent performance. JLR released a slide in their recent quarterly update on discounting. JLR group claim to be at roughly 20% discount, 5% lower than the market. What is causing that? I’m assuming the Range Rovers are not discounted as much, but the Jaguars are heavily discounted and it averages out.

Historically, even in 2014, your Range Rovers were 0-5% discount, for Range Rover/Range Rover Sport. Discovery was starting to slip from 5% discount towards just breaking even. But Jaguar was really stuck at a level of 20-30% discount, and routinely 25-30%.

Why is this?

I don't know, because I never fully researched it, but my impression is that that discounting was always there, we just didn't know about it or chose to ignore it. And that retailers were just trading the cars out, basically. At the volumes that were going through, that was the price that was easy to get the cars to shift, and that became the normal price for the Jaguars. It's become two things: the first is, what's the value of a Jaguar? And the second thing is, what is the consumer used to? It’s “Jaguar, that's the 30% discount brand isn't it?” that becomes the norm. So they have really got a problem there to dry that out, because consumers are expecting a greater discount.

How do you change that?

I don't know what has happened with F-Pace, but the intention was to try and create genuine demand with genuinely hot products in Jaguar. So there's the F-Pace. In parallel, dry up the supply on the saloons, and actually put more localised products in place, with longer wheelbases more suited to Chinese consumers. That should have helped, but probably the volume was kept high enough that they've never backed off that, I suspect.