Why Going Electric Will Not Save The XJ or Jaguar
Jaguar is heading for a brighter future with a unicorn over the rainbow announcement of a £1 billion GBP investment in an electric car future. The XJ will be the first recipient of the all-new electric powertrain. The last fossil powered XJ will roll off the UK production line in July. By 2020 the new electric powered XJ will arrive, the first all-electric premium luxury saloon. Not even the Mercedes S Class or the BMW 7 Series offers an all-electric variant.
However, being first to market doesn’t necessarily give you market leading bragging rights in terms of sales. One assumes people will simply wait for an all-electric S Class and or BMW 7 Series. Why is Jaguar targeting the XJ? The XJ sells in extraordinarily low volumes.
Take a simple comparison with Jaguar XJ sales vs Mercedes S Class sales in the US. Jaguar sold 1,579 XJ’s in 2018, Mercedes sold over 14,000 S Class saloons. It’s a similar sales story in other territories. People are not buying a lot of Jaguar XJ’s.
The £1 billion GBP of investment is reported positively as safeguarding jobs, for the short term at least. For the long term, it is not enough to save Jaguar from itself. The company posted a £3.6 billion loss in January which resulted in 4,500 job cuts.
Meanwhile, Volkswagen is investing $50 billion USD in battery technology alone. BMW is investing a similar amount. Jaguar is basically servicing a debt and borrowing money because it basically doesn’t have enough money in its bank accounts.
However, Jaguar and Land Rover will partner BMW to share next-generation electric transmissions, motors, and electronics. So that next generation all-electric Jaguar XJ will be using BMW parts. Presumably, Jaguar will be paying BMW for that shiny new technology.
The simple fact is that while current Jaguar vehicles are good enough they are simply not good enough against German rivals. The other fact is that Jaguar doesn’t sell enough vehicles. In the three main territories US, China and Europe Jaguar sold a combined 150,000 vehicles for 2018.
In the same territories, Mercedes sold over 1,700,000 million vehicles. Mercedes does have a bigger product portfolio. But the numbers speak volumes of Jaguar’s low volume sales ledger. To that end, Jaguar is making a loss, it should be selling up to 500,000 vehicles to break even.
The Jaguar Land Rover entity sold a combined 614,000 vehicles in 2018. Which means Land Rover is subsidizing Jaguar. But such an arrangement can not last without affecting sales. Because if either of the two sells lower volumes for any given period the whole company is in trouble.
That’s what happened earlier in the year. But is the electric Jaguar future really the unicorn over the rainbow moment? can it possibly lead Jaguar into the future? If it has a future at all. Jaguar requires multiple billions to survive long term, £1bn or £4bn is not enough.
My guess is that Tata Motors, the owners of JLR, is holding out for a buyer, more than likely a Chinese buyer who has many spare billions to turn the whole JLR brand around.