Jaguar Land Rover Increases Investment to Hedge Against Slowing EV Uptake
Introduction
Jaguar Land Rover (JLR) has announced an increase in its five-year investment plan from £15 billion to £18 billion. This decision comes as the demand for electric vehicles (EVs) has been slower than predicted, leading JLR to allocate more funds towards platforms that support both combustion engines and electric powertrains.
Investment Plan Adjustment
Last April, JLR unveiled its original £15 billion investment plan, which included spending on new EV platforms such as the mid-sized EMA. However, due to the sluggish demand for EVs, JLR has decided to increase its budget to extend the lifespan of internal combustion engine (ICE) cars.
During the company’s investor day in June, JLR CFO Richard Molyneux explained that the investment increase is necessary to maintain the parallel production of both BEV (Battery Electric Vehicle) and ICE vehicles. He also mentioned that until one powertrain technology dominates globally, JLR will continue to invest in multiple powertrains simultaneously.
Impact on Manufacturing
JLR CEO Adrian Mardell stated that ICE cars and EVs will coexist at the Halewood plant for a limited period. Currently, the plant produces the Range Rover Evoque and Land Rover Discovery Sport. The MLA Flex platform, used for the Range Rover and Range Rover Sport, supports various powertrains, including petrol, diesel, plug-in hybrid, and electric drivetrains.
Jaguar’s Electric Rebirth
Jaguar has undergone a transformation into an electric-only brand. The company plans to launch three new luxury EVs, with the first model arriving next year. However, the release of the four-door GT, which was initially scheduled for the end of this year, has been delayed. JLR will showcase a concept by the end of 2024, with sales starting in 2025.
Molyneux highlighted JLR’s advantage of being a follower in the BEV market, allowing the company to learn from competitors’ experiences. JLR aims to launch four Land Rover EVs and two Jaguar EVs by 2026.
Additional Investment Details
JLR expects to spend £3.5 billion this financial year, with an annual investment of £4 billion going forward. EVs will receive 65% of the investment, while the remaining 35% will be allocated to flexible platforms that support multiple powertrains.
JLR plans to mitigate inflationary costs by establishing a better working relationship with suppliers. The company aims to reduce costs collaboratively and has set up a “value optimisation office” to scrutinize expenses and increase profitability.
Conclusion
Jaguar Land Rover’s decision to increase its investment reflects the slower-than-anticipated uptake of EVs. By allocating more funds to flexible platforms, JLR aims to extend the lifespan of ICE cars while continuing to develop and launch new EV models. With a focus on value and higher transaction prices, JLR aims to achieve a 10% operating profit margin this year and eventually reach a 15% margin in the luxury market.
