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May 16, 2022 02:14 AM

Jaguar Land Rover gets image boost from chips shortage

Jaguar Land Rover says it is getting a boost from the chips shortage as its cars become more desirable.

Nick Gibbs
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    Range Rover Sport 22 14.jpg

    JLR has added more refinement and high-tech equipmen to its latest Range Rover Sport (pictured).

    LONDON -- Jaguar Land Rover is getting an unexpected boost from the global chips crisis as its cars become more desirable, CEO Thierry Bollore said.

    Automakers including JLR have been forced to reduce production because of a shortage of semiconductors, squeezing supplies to dealerships.

    However, the scarcity of new models is massively boosting the company's brand image, Bollore said.

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    The company has been harder hit by chip shortages than competitors, partly because of the complexity of its models, Bollore told investors during an earnings call on Thursday.

    "We are losing some market share for sure," he said. "But the impact on the ground is higher desirability because the scarcity is creating that desirability," Bollore said.

    JLR's order book increased to 168,000 at the end of March, up from 155,000 at the end of December, the company said in its quarterly earnings report.

    Upmarket push

    JLR has said it wants to focus less on volume and more on pushing up pricing as it stops mirroring the strategies of German premium rivals.

    The Land Rover brand has added more refinement, high-tech equipment and paid greater attention to design detail to its latest generation Range Rover and Range Rover Sport to offer what it calls “modern luxury.”

    The chip shortage is helping that. “The brand is being boosted toward modern luxury to a higher level than we expected and faster,” Bollore said.

    The starting price of the new Range Rover Sport that goes into production in June has increased by 22 percent compared with its predecessor to 79,125 pounds ($97,553), up from 64,760 pounds, in its UK home market.

    The price is significantly above rivals such as the BMW X6, which begins from 65,740 pounds in the UK, and the Audi Q8, which costs from 68,955 pounds.

    At 99,375 pounds, the new-generation Range Rover starts at a price that is 13 percent above the previous generation. Prices rise to 157,820 pounds for the V-8 SV model.

    JLR said that 46,000 of its 168,000 orders are for the Range Rover model.

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    Speedier EV shift

    JLR has said it will electrify its lineup and ditch combustion engines at Jaguar -- the smaller of its two brands -- by 2025, while Land Rover will get its first full-electric model in 2024.

    JLR is working to advance the timelines on its electrification plan, P.B. Balaji, finance chief of its parent company, Tata Motors, said on Thursday.

    "We will do everything we can to bring it forward but currently we have not put a date on any of those yet," he said. "All efforts are underway to see how best we can bring it forward."

    Full-year loss

    JLR on Thursday posted a lower profit for the quarter ending March 31. The company also swung to a loss last year.

    Profit for the quarter was 9 million pounds ($10.99 million) compared with a profit of 534 million pounds a year earlier.

    The result meant the automaker finished its financial year with a loss of 412 million pounds, compared to a profit of 662 million for the previous financial year.

    The company was impacted by chip shortages as well as the run-out of the previous-generation Range Rover.

    Automakers globally are grappling with higher input costs, which have been exacerbated by supply-chain problems triggered by China’s pandemic lockdowns, along with the chips crisis. The issues led Tata Motors to post a loss of 10.3 billion rupees ($133 million) for the three months ended March 31.

    Profit warning

    The lockdowns as well as the model changeover to the new Range Rover Sport are expected to limit volume improvements in the current quarter, possibly resulting in negative earnings before interest and taxes as well as negative free cash flows, JLR said in an earnings statement.

    Tata Motors and JLR plan to increase prices to offset some of the expected rise in costs, Balaji said Thursday, declining to offer more details.

    The protracted issues in sourcing enough chips and rising inflation are the company's biggest concerns, he said.

    Bloomberg contributed to this report

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