A New Baby? (no not another Royal story...)
JLR is expected to bite the bullet and plough significant investment into a new 'baby Jag' model to compete head on with the likes of the best-selling BMW 3 Series. As I've been saying for some time, while Range Rover and Land Rover brands have roared ahead, Jaguar has underperformed, thanks in large part to some major gaps in its product range.
Jaguar's present range offers two sports cars and two executive saloons, and these are in slower growth segments of the premium market. Sure, the beautiful new F-Type has just filled one gap, namely for a two-seater sports car that harks back to exciting E-Type times. And the XF Sportsbrake offers an estate Jag for the first time since the X-Type (a much undervalued car) was discontinued back in 2009.
But there are still some glaring gaps in the Jaguar line up; notably in the form on an entry-level saloon to fight the BMW 3 -Series and Mercedes C-Class, and a crossover Jag that uses Range Rover's advanced 4-wheel drive technology to target the rapidly expanding SUV market (it's no surprise that VW has just announced an extension of its SUV platform sharing strategy to include Bentley; Lamborghini is likely to be next).
The Porsche Cayenne SUV (based on the same platform PL71 platform as the VW Touareg and the Audi Q7) was launched over a decade ago, and makes up over a half of Porsche's sales now. Meanwhile, the smaller premium sector is doing well, even in moribund Europe, as buyers are prepared to spend more on a premium car like the BMW 1 series.
The new Jaguar models are seen as key for China, the firm's biggest market. Here the Evoque and the Freelander are JLR's current best sellers. But with the SUV market there set to treble by 2020, Jaguar itself needs an SUV presence.
'Rebooting' Jaguar, developing and building its own engines, and cutting emissions are the key challenges the firm faces as the amazing turn around for the firm continues.
So it's no surprise that speculation is mounting that JLR will soon announce a major new investment in Jaguar (maybe at the Frankfurt Motor Show in September), with a baby Jag compact saloon to go on sale in 2015 along with an SUV crossover and estate version. It's something I've been calling for a while now and it seems that JLR is now ready to stump up the heavy investment needed to develop its first genuinely new platform under Tata ownership.
Like over recent JLR models such as the XJ and Range Rover, the new model will be made from aluminium at its Solihull plant (previously only used for Land Rover and Range Rover models). Significant new job creation is likely as Jaguar production is ramped up.
This is needed as JLR's recent growth has been very much driven by Land Rover and Range Rover brands and Jaguar is effectively an under-exploited brand. Over 80% of JLR's annual sales currently come from the Land Rover/Range Rover brands.
The hope is that JLR's recent success can become sustainable growth over the medium to long-term - for that Jaguar needs to play a much bigger role in helping the firm to grow and meet significant, albeit manageable challenges over the next few years.
Firstly, the firm is small compared even to the likes of key premium rivals such as BMW (which sells four or five times as many cars). Over the medium term JLR needs much bigger volumes (600,000 units a year and more as compared to around 400,000 likely for this year) to generate the cash for new model development. On this the firm is going in the right direction, and has ambitious expansion plans.
Secondly, so far JLR under Tata ownership has been able to ride on the back of huge investment by Ford in new platforms. The XF, XJ and Evoque were all basically built on Ford investment. From the Baby Jag onwards, JLR and Tata are effectively on their own. The strategy has to be built on big investment in new technologies and models, funded by big profits and continued growth.
On this, prospects look good, barring another major economic and financial downturn (which tends to hit the premium sector hard). JLR can continue to grow the business significantly over the next decade, if it gets the cars right. Overall, the firm has a clear strategy of where it wants to go and how to get there.
Professor David Bailey works at Coventry University Business School