GARY PUSEY
“Sir Ralf has stated that JLR must have alliances with other manufacturers if it is to survive, leading to persistent rumours of takeovers and mergers. Owner Tata meanwhile insists JLR is not for sale”
INEOS Grenadier: all you need to know about the 4x4 taking over from the Land Rover Defender’. That’s how the Daily Telegraph headlined its article on Sir Jim Ratcliffe’s new vehicle, which was revealed to the world at the beginning of July. It was probably not what JLR’S CEO, Prof Dr Sir Ralf Speth, wanted to be reading over his muesli as he grapples with the firestorm of challenges facing his company at the moment.
It’s a rather poignant headline because Ratcliffe offered to buy the real Defender tooling and production line and continue making it himself. He was furious that JLR had decided to stop production and disbelieving of their excuse that the market for such a basic 4x4 was not big enough to be commercially viable. And he was dismissive of JLR’S suggestion that it was impossible to redesign the vehicle to make it compliant with emerging safety legislation.
By all accounts JLR was initially warm to the idea, but then somebody realised just how daft that would be and pulled the plug on negotiations. Ratcliffe promptly announced that he would build his own, and JLR responded by filing for protection of the Defender body shape and design. They lost, and I can’t help wondering whether INEOS is making merry with the court’s decision by giving the Grenadier more than a hint of real Defender styling. Squint, and there really isn’t much between the two, despite the claims from Ineos that the Grenadier’s appearance is driven purely by function.
This promises to be a battle royal, with JLR betting on the new Defender as the way forward and INEOS believing that JLR has abandoned its roots and left a gaping hole that the Grenadier will fill. New Defender is a luxury SUV with every conceivable accessory on the options list, underpinning a clear message that aftermarket accessory manufacturers are not welcome. And it all adds up to a price that positions new Defender firmly in the premium vehicle category. Yes, it’s a more than capable off-road vehicle and yes, it comes from a long line of Land Rovers that have been conquering the world since 1948, but I don’t think many new Defender owners will be doing any more off-roading than the owners of Evoques do.
INEOS, meanwhile, has focussed on designing a vehicle that is intended to be used for exactly the purpose that the original Land Rover was created for. They’re already talking about a pick-up version and a chassis cab, and they’re talking about making the Grenadier ‘open source’, meaning they positively welcome bespoke conversion specialists to take the basic chassis and cab and develop it to suit the needs of the people, companies and operators around the world who used to buy the utility Land Rover. INEOS predicts that it can grow production to around 30,000 sales a year. Time will tell.
Sir Ralf will be retiring from the top job in September, so this and all the other problems brought into sharp focus by the pandemic will land in the lap of his successor. JLR is still waiting to hear whether it is going to be given over a billion pounds of taxpayers’ money and what the terms of such a massive loan will be. Apparently, JLR is one of six companies considered to be vital to the national economy that are being considered for cash injections under the government’s ‘Project Birch’ special scheme.
But another huge loan following on from the one already secured in China only buys a relatively short amount of time and Sir Ralf’s successor will have to take some decisive steps to reduce costs. The company won’t be able to rely on selling vehicles to dig itself out of the deep hole it’s in, because this will take too long and the outcome is too unpredictable. Analysts were underwhelmed when the company revealed that it had only 11,000 firm orders for the new Defender, and around the same number of requests for test drives.
JLR’S sales crashed in the first three months of the calendar year, coming in nearly a third lower than the same period in 2019. In April, the company sold only 14,709 vehicles around the world, 62 per cent lower than the same month last year, although things improved slightly in May and were only 43 per cent down. The big question is, how quickly will sales recover?
Industry analysts have suggested that reducing the number of models the company offers is inevitable. Some have argued for a long time that the company offers too many models that overlap each other and are not differentiated enough, which has always been my view as well. Others have gone so far as to argue that drastic pruning at Jaguar is needed, believing that the only viable future for the struggling business it to become a niche player focussed on SUVS. Others think this is lunacy and only steals sales away from the Land Rover side of the business. Sir Ralf has stated that JLR must have alliances with other manufacturers if it is to survive, leading to persistent rumours of takeovers and mergers. Owner Tata meanwhile insists that JLR is not for sale and promises to reveal its plans for the company by the end of August.
Someone’s got to make some difficult decisions and I can’t say I envy the new CEO, not least because Sir Ralf isn’t really going away. He’ll be the new non-executive vice-chairman.