Interview Transcript

Is the choice of design architecture the core driver of the issues today for JLR?

My view is that maybe the underlying issues are not the ones that are being talked about in public. Clearly, China is being talked about and is a very substantial issue, because honestly the business’s profitability has hinged on China for several years. But the fundamental issues to me are: cost, and that is two things, design cost - we've talked about aluminium architectures and the associated costs of that - and the other thing is impact of exchange rates, because a high proportion of materials and high value parts of the vehicle being sourced out of mainland Europe in Euros.

So they have enormous cost issues, which I don't believe they have really been able to address effectively. There has been a real intention to try and increase UK sourcing to try and mitigate the effects of exchange rates. But, most manufacturers and suppliers - even more so in the last 2 years because of Brexit issues - are just not willing to relocate into the UK, when the whole industry is so unstable at the moment. So I think there's a fundamental cost issue.

I think there's also a portfolio issue, with investment having been made in segments that are very very challenging. I think the XE is the best example of this to be honest. Because you have incredibly well established German name plates in those segments selling much higher volumes with much better distribution in global markets, at lower cost. There's the issue of steel bodied vehicles versus aluminium, which have a real volume cost reduction opportunity versus JLR’s model. And finally, you're selling them when so much of the business has to be financed. Those manufacturers have in-house finance activities, which allows them to be hugely competitive on lease rates.

Basically, we've gone from a situation where you were selling primarily Range Rovers, very often to wealthier high-end private buyers who were actually able to fund these vehicles, to mainstream business. Let's not kid ourselves, the BMW 3-Series and vehicles like that are just volume cars now. Okay, they are premium brands. But, if you look at the sales figures and what they’re used for, they are just volume cars. This is all about price, all about cost. They’re frequently company-owned, and they're just after the best deal. Trying to enter that segment with a direct facing competitor to the BMW 3-Series with a flawed strategy. It simply hasn't worked. As we can see, the volumes were never high enough and they're getting lower. The car just isn't distinctive enough, it’s too high cost, and they haven't got the financing available. Too many buyers will simply say, “It's not worth it.”

Land Rovers and Range Rovers have a very distinctive brand appeal. I think Jaguar simply hasn't managed to establish the level of appeal that persuades people to pay a premium for the brand. If you've got premium cost, you need to have premium pricing, if you are going to have a successful business.

Maybe we need to explain the difference in how we should look at the aluminium architecture versus steel architecture in terms of cost, process, design, et cetera.

Yes, it has impacts on all. Fundamentally aluminium as a raw material is a substantial cost penalty versus steel. It varies, obviously, like all material costs. It can change depending on world economics and supply but, fundamentally, it is always more expensive than steel.

Sign up to test our content quality with a free sample of 50+ interviews