JLR has announced its ‘Reimagine’ strategy giving a timeframe for its product electrification drive at a time when the conventional fuel prices are rallying to an all-time high and seems to continue so.
It was May 2012; when the then UPA government approved the steepest ever hike in petrol prices across India, shooting the price suddenly by Rs 7.54 per litre. Petrol price in Delhi then reached Rs 73.18 per litre, prompting the then Gujarat Chief Minister Narendra Modi to term the hike in petrol prices as “a prime example of the failure of the Congress-led UPA.” On Monday, the petrol price in the national capital was up at Rs 88.99 from Rs 88.73 per litre on Sunday after seventh time since Finance Minister Nirmala Sitharaman presented the so-called ‘budget like never before’. Where are the fuel prices heading to? Nobody knows!
It is not only in India, the case is similar for other countries as well. Global crude oil prices have increased by more than 50% to over $63.3 per barrel since October 2020, forcing the oil retailers to increase pump prices. On 15th February 2021, Brent crude was up 66 cents, or 1.1%, at $63.09 a barrel, after climbing to a session high of $63.44, the highest since 22nd January 2020. The US West Texas Intermediate (WTI) crude futures too gained 86 cents, or 1.5%, to $60.33 a barrel, touching the highest since $60.77 on 8th January 2020.
With such a surge in fuel prices, since FM Sitharaman announced the imposition of Agriculture Infrastructure and Development Cess (AIDC) of Rs 2.5 and Rs 4 per litre on petrol and diesel, respectively; alternative fuels like CNG, Auto LPG are becoming more relevant. Also, hybrid vehicles, electric vehicles are becoming more relevant than the conventional Internal Combustion Engine (ICE). Besides the fuel price hike, the tightening emission norms too are driving the automakers to rethink their product strategy.
JLR aims to be a net-zero carbon business by 2039
While several automakers have already announced their electrification plan in line with several country’s respective zero-emission goals. British luxury automobile marquee Jaguar Land Rover (JLR) becomes the latest among them as the Tata Motors subsidiary has announced its ‘Reimagine’ strategy. As per this strategy, JLR aims to be a net-zero carbon business by 2039.
Reimagine Jaguar Land Rover
According to the ‘Reimagine’ strategy, JLR aims to become right-sized, repurposed, and reorganised. The strategy will see the OEM achieving net-zero carbon emissions across its entire ecosystem such as supply chain, products, and operations by 2039. This programme will cover both the Jaguar and Land Rover brands, on separate architecture though. This will be a part of the luxury carmaker’s annual commitment to investing around GBP 2.5 billion in electrification technologies and the development of connected services to improve the all-round experiences of customers, besides data-centric technologies.
Jaguar will ditch the internal combustion engines (ICE) by 2025.
JLR has said in an official statement that as part of the long-term investment programme, developments to achieve this target are already underway with prototypes arriving on UK roads within the next 12 months. The ‘Reimagine’ strategy is claimed to be allowing the brand to enhance and celebrate the uniqueness like never before. “The Reimagine strategy allows us to enhance and celebrate that uniqueness like never before. Together, we can design an even more sustainable and positive impact on the world around us,” said Thierry Bolloré, Chief Executive Officer.
In addition to betting big on electric battery technology, JLR is also planning to develop electric cars that can run on hydrogen fuel cells. So far, Toyota and Hyundai have invested heavily in hydrogen fuel cell technology as an alternative green fuel solution to the lithium-ion battery-driven EVs.
JLR’s announcement comes at a time when electrification is being seen as the need of the hour and it would help the auto company to compete with other automakers in the coming decade.
What products are in pipeline?
Land Rover, the luxury SUV marquee will bring six pure electric variants through its three families – Range Rover, Discovery, and Defender over the next five years. The first one from these is scheduled to be launched in 2024.
The automaker will use its upcoming flex Modular Longitudinal Architecture (MLA) for the upcoming electric variants of its luxury SUVs. These modular platforms can underpin both advanced electrified internal combustion engines (ICE) or hybrids and fully electric variants as the carmaker evolves its product line-up. On the other hand, future Jaguar cars will be built exclusively on pure electric architecture.
Overall, both the Jaguar and Land Rover will launch pure electric variants for their respective cars, nameplate by nameplate, by 2030. JLR hopes that by this time, in addition to 100% of Jaguar sales, around 60% of Land Rovers sold globally will be all-electric models.
Jaguar land Rover financials for December 2020 quarter:
|Particulars||December quarter financial||YoY change|
|Revenue||6 billion pound||-6%|
|EBITDA margin||15.80%||560 bps|
|EBIT margin||6.70%||400 bps|
|Profit before tax||439 million pound||38%|
Reimagine simplified, streamlined and agile operations
JLR claims that through the ‘Reimagine’ programme, using a streamlined production method the company will be able to establish new standards in efficiency and product quality scale. “By consolidating the number of platforms and models being produced per plant, the company will be able to establish new standards in efficient scale and quality for the luxury sector. Such an approach will help rationalise sourcing and accelerate investments in local circular economy supply chains,” said the tata owned British brand.
Under the Reimagine strategy, MLA architecture’s manufacturer Solihull will be the home to the future advanced Jaguar pure electric platform. The automaker will roll out services like the Pivotal subscription model to other markets following the launch in the UK. The model has been invented by JLR’s incubator and investor arm InMotion. Also, as part of the ‘Reimagine’ long-term programme, there will be a new centralised team that will be formed to build on and accelerate pioneering innovations in materiality, engineering, manufacturing, services, and circular economy investments.
JLR aims to achieve a four-digit EBIT margin in 4 years.
JLR recently introduced a ‘Refocus’ programme to drive transformation by consolidating existing initiatives like Charge+ with new cross-functional activities. In a bid to accelerate this, JLR will substantially reduce and rationalise its non-manufacturing infrastructure in the UK. This move will make the operations of the company more streamlined and agile, claims JLR.
Talking about the strategy, N Chandrasekaran, Chairman of Tata Sons, Tata Motors, and Jaguar Land Rover Automotive plc, said that the ‘Reimagine’ strategy will take JLR on a significant path of acceleration in harmony with the vision and sustainability priorities of the wider Tata Group. “Together, we will help Jaguar realise its potential, reinforce Land Rover’s timeless appeal, and collectively become a symbol of a truly responsible business for its customers, society, and the planet,” further added Chandrasekaran.
Reimagine Tata-JLR relation
Tata Motors acquired JLR as a wholly-owned subsidiary back in 2008. The strategy will revise the relation between Tata Motors and JLR. In a bid to materialise this vision, JLR will curate closer collaboration and knowledge-sharing with Tata Group companies to enhance sustainability and reduce emissions besides sharing best practice in next-generation technology, data, and software development leadership, which will eventually help the Indian automaker as well that has been trying to take lead in terms of new-generation mobility solutions in the country.
Talking about this renewed strategy for Tata-JLR relation Bolloré said that this could prove to be a unique opportunity. “We have so many ingredients from within. It is a unique opportunity. Others have to rely solely on external partnerships and compromise, but we have frictionless access that will allow us to lean forward with confidence and at speed,” he said.
All these moves are claimed to be helping the brand to advance towards double-digit EBIT (earnings before interest taxes) margins and positive cash flow, with a target to achieve positive cash net-of-debt by 2025. This target of generating a double-digit Ebit margin would help reduce the net automotive debt and improve cash flow going forward, which would also result in the growth of Tata Motors’ valuation.