BackTata Motors’ JLR to cut vehicle platforms but increase new product launches
The reduction in the number of platforms will help the car-maker generate economies of scale
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New Delhi: Tata Motors Ltd’s luxury car unit Jaguar Land Rover (JLR) will cut the number of car platforms from seven to five to save costs, as it plans to add seven new models over the next five years, according to two people familiar with the development.
The reduction in the number of platforms will help the car-maker generate economies of scale by making at least 60-70% of car components common to the new models, cut inventory and boost productivity, the people said, declining to be identified.
The luxury car maker plans to increase the number of models that it sells to 21 in 2019 from the current 14.
By doing so, JLR expects to expand its operating margin by 150 basis points, said one of the people familiar with the company’s plans. One basis point is 0.01%.
Tata Motors expects JLR’s operating margin to be in the range of 14-16% over the medium term, without factoring in foreign exchange fluctuations and savings from the platform consolidation.
Operating margin at the JLR unit narrowed to 15.2% in the March quarter from 17% in the preceding three months.
The new models that JLR plans to introduce include sports utility vehicle Discovery Sport (to start selling by the end of this year), luxury sedan Jaguar XE (first quarter next year), a replacement for Jaguar XF and Range Rover Evoque convertible (by the middle of next year), a Jaguar crossover (by 2015-end), a mid-size Range Rover (by mid-2016), a new Discovery (2016-end) and in the following year a replacement for Jaguar XJ.
Reducing the number of platforms will also cut product development time for the car-maker.
Ever since Tata Motors acquired the British brands in 2008 for £1.3 billion, JLR’s focus has been on reducing cost and optimising efficiency.
A Jaguar Land Rover India spokesperson declined to comment. “Jaguar Land Rover continues to explore opportunities for efficient product creation processes that will enable us to meet the global demand for our products," the spokesperson said. “We do not share information on our future product strategy."
To support its new models, the firm is also increasing production capacity at its three plants in the UK. JLR’s current capacity stands at 450,000 units.
With its China joint venture to start production in the first quarter of 2015, JLR’s capacity will rise by 130,000 units per year. Further, its plant in Brazil will add 24,000 units in 2016, thus taking total capacity of the firm to 750,000 units by 2016-17.
A feasibility study for a plant in Saudi Arabia is under progress. If the company builds the plant, it will add 25,000-30,000 units to its total production capacity, which will become 780,000.
JLR’s capacity constraint for its key products Range Rover, Range Rover Sport, Evoque and FreeLander will restrict its growth to a single digit in the current financial year, said Jinesh Gandhi, an analyst with Mumbai-based Motilal Oswal Securities Ltd. “JLR would focus on more premium trims for constrained models, thereby aiding profitability," Gandhi said.
Jaguar Land Rover’s strong global sales performance over the past two years has helped parent Tata Motors offset a weak showing at its Indian unit.
The India operations, however, continues to be a drag. Losses increased to ₹ 817 crore during the March quarter, from ₹ 312.15 crore a year ago. Net sales fell 22.8% from a year ago to ₹ 8,438.86 crore, as sales of passenger and commercial vehicles contracted.
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