Jaguar Land Rover faces its toughest test since the two brands were brought under the same roof by India's Tata Motors more than a decade ago.
With 2018 U.S. sales down 23 percent, Jaguar is reeling, mostly because of consumers' shift from cars and the slow launch of the E-Pace compact crossover.
Land Rover's sustained success with rugged off-roaders and upscale luxury all-terrain vehicles has brought competitors from nearly every major brand. The ultraluxury Range Rover, launched in 1970, had little competition until recently, from Rolls-Royce and Bentley. Land Rover, whose U.S. sales climbed 23 percent in 2018, will likely carry the company this year while Jaguar continues to retool.
Andy Vine, 56, dealer principal at Jaguar Louisville and Land Rover Louisville in Kentucky and chairman of the Jaguar Land Rover Retailer Cabinet, spoke with Staff Reporter Richard Truett. Here are edited excerpts.
Q: Now that JLR has confirmed the Defender for the U.S., tell us about it.
A: We've seen it. When the dealers went to Portugal to see the I-Pace, we got a brief glimpse. I think that is one of the reasons why, in an economy that is shrinking, Land Rover dealers are so positive about the future. When you think of what Jeep has done in those segments and then you think of a modern Land Rover vehicle, the optimism is through the roof.
Does the skyrocketing value of 1990s Defenders imported to the U.S. portend success for the new Defender, or is it more complicated than that?
When you take that and see what Defenders are bringing in the used-car market, sometimes, 40- and 50-year-old vehicles, all that is going to create the inertia and energy to move some serious volume. What [Land Rover design chief] Gerry McGovern and his team have done is keep the old, iconic design but move the product into the future. A lot of the vehicles we deal in are small niche, but I think there is great opportunity for the brand and for JLR to get some volume out of the Defender worldwide.
Some traditionalists might not like the fact that the new Defender won't come from the plant where the original was built or even from Great Britain. Will the Defender being built in Nitra, Slovakia, turn off some potential buyers?
Having visited the Slovakian plant, I can tell you it is one of the most modern and futuristic plants I've ever been in. It's full of technology. We already have Discoveries coming from there that, right out of the gate, are coming with unbelievable quality. What we are also excited about in the Slovakia plant is the ability for JLR, if the volume is needed, to increase the size and capacity to almost double the 150,000-unit yearly capacity. It's already a massive plant, and there is nothing but upside with the product coming out of there.
JLR has promised to deliver the new Defender next year. Are dealers accepting orders?
Dealers that I have talked to already have pretty solid order banks on Defender, and many of us, including myself, are ordering products for our own individual use and also to put away. And I don't do that very often. We sell a lot of great brands, but I am so excited about this product that I have one coming for myself.
One of the biggest and most expensive programs undertaken by JLR was training dealers on how to sell and service the battery-powered Jaguar I-Pace. What have dealers learned as Jaguar takes on Tesla in the luxury EV market?
JLR and the dealers made substantial investments.
It started with the trip to Portugal to show the dealers the product, then it was on to the meeting in San Diego for dealers and top management. We all had to learn about something brand new — the questions and concerns that would come up on EV powertrains and charging, things that we are going to have to do in our shops that are different, and to be able to present to the consumer how to handle home and public charging options. We also had to learn about state and local and federal incentives that are out there for the consumer, and then being able to access ongoing resources for electric vehicle purchases and the ownership experience.
The training continued with our sales and electric vehicle specialists over the summer at Irvine, Calif. That was a five-week, 28-event course and there were almost 1,865 attendees and they learned all about the battery-electric vehicle features and functions, the wants and needs of that consumer. We also learned who our competition is and how to best market the vehicle itself. It was very intensive.
Is Tesla the competition for the I-Pace?
Tesla is the dominant player today. But when we look at where the I-Pace is going to compete, it is in the medium premium SUV segment. Today, the Tesla Model X and S are the closest competitors. But we'll also compete with the Porsche Cayenne and Macan and several vehicles coming from other brands, including the Tesla Model Y, Audi Q6 e-tron and Mercedes electric vehicles. It's a rapidly changing environment.
We're hearing there is a substantial backlog of I-Pace orders. Will JLR be able to deliver enough units to satisfy demand?
I think this year we will be able to sell all that JLR is offering for North America. The vehicle is being offered first where the electric vehicle charging infrastructure is already in place. California is getting a very large percentage of our volume. I think there will be smaller Midwest dealers, like myself, that will probably always have a little more demand than supply. But as you get into the New York, Florida, Texas and some of the bigger markets, they will have a nice run. It'll be a good product for our dealers there.
Jaguar had a tough 2018. Can the I-Pace breathe life into the brand?
It has been a tough year for Jag. Part of that has to do with the shift in the market. We see the tremendous swing in the market from sedans and sports cars to SUVs. And we've also got some older products sitting on the showroom floor that are getting long in the tooth. The current XJ is almost 7 years old. The F-Type is 6 years old. XF is 3 years old. F-Pace and XE are 2.5 years old.
But it doesn't hurt to have the Luxury Green Car of the Year in your showroom. And I see the I-Pace totally as a halo vehicle. Being an SUV, it will bring a lot of excitement. It was a nice vision Jaguar had to move into the SUV segment and this is a continuation of that. So, I do think the halo effect will bring some great energy into the showroom. Not everyone can afford and $80,000 to $90,000 electric vehicle. But to be able to have the SUVs and sedans to offer can only help us in 2019.
Why did the E-Pace utility have such a slow start?
The inventory came in slow and JLR didn't really want to spend the majority of its advertising dollars in the January time frame, so the company held off on the advertising until April when we got some inventory. Also, most of the vehicles that came initially were higher priced and the demand was really for lower specification vehicles. Dealers and JLR had to make some adjustments to get the inventory mix correct. Those couple of things did create a very slow launch.
But there is one thing that is great: The consumers who we sold the product to absolutely love it. I look through our [survey] results coming from consumers after purchase. And the E-Pace has a very high satisfaction rate. They like the size and performance and driveability. The fit and finish is great. It will get there. It just needs some marketing and proper inventory mix. What we as the dealer body have been asking for is not only the proper mix, but also a strong competitive lease point. I think if we can get all that, we'll have a real winner. The product already is a winner.
Are there lessons to be learned from the E-Pace rollout that will help prevent slow launches in the future?
There are. I think the biggest thing is that Jaguar competes with a lot of niche brands and we are never going to be the big volume player in those segments, so you have to make the advertising work. The budgets are what the budgets are — they're not bottomless. So, being able to pinpoint and hit the market with the right product and right lease message, those make for winning launches. Every brand I deal with always wants to do the same thing.
They always want to come with the expensive ones to start and then kind of settle into where the market is. Jaguar is not alone. This happens to most brands I represent.
You've said that JLR North America CEO Joe Eberhardt and other JLR senior executives are open to listening to dealers' concerns. Were retailers able to convey the situation with the E-Pace, and did JLR make the recommended changes to the mix and with the leases?
That ball is in their court. But it has been heard and we'll continue to push. But the budget is the budget, and that's what we all have to deal with.
Does JLR need to re-examine its advertising strategy and buy more national ads in the mainstream media and in smaller markets instead of focusing on cable channels and in places where the brands sell well?
Basically, JLR's national advertising investment is very heavily concentrated on cable, rather than broadcast. And the reason for that is that JLR is trying to reach and pinpoint the very affluent target audience that most of our models are going after. From a local standpoint, the amount of advertising is all reflected in the size of the market and the volume that those dealers do.
In smaller markets how do you increase volume without more aggressive marketing and advertising?
You've got to be smart. Kim McCullough (JLR North America vice president of marketing) and her team try to help the retailers. What we are going to go after and chase, we do that through cable buys and a lot of online that hits right at our target audience.
If industry sales have peaked, will that encourage the last holdouts to meet JLR's plan to have Jaguar and Land Rover brands under one roof?
About 94 percent of the dealer network is channeled. We're on track for 46 more facilities to be completed by the end of March, and another 35 next year. That is the biggest thing. Even though we could be moving into what could be a down economy. We had an extremely strong year on the Land Rover side with the arrival of the Range Rover Velar and freshened versions of the Range Rover Sport and Range Rover. I think that energy and the financial results that dealers were able to come up with in 2018 has really made for a strong commitment.
What's the outlook for 2019?
Look at what's coming. There's an all-new Range Rover Evoque coming this year. All the Defender product that is coming next year. We are dominating several segments with the likes of Range Rover and Range Rover Sport. And we have such a great opportunity with Discovery.
The design of the new Evoque is conservative. Will buyers notice that it is new from the wheels up?
Having seen the new Evoque in the flesh, I think it is a great transformation from where we were to where we are heading. It takes on a lot of looks from the Velar and moves that into the Evoque. There are things you can't see in the pictures. There is more passenger knee room. There's greater luggage space. There is more storage for small items. All of those things will be a great benefit. And Land Rover has made a great update on the instrument panel, which we saw first with Velar, then the Range Rover Sport and Range Rover. Now it moves into the Evoque. There's upgraded materials, sustainable materials. I think the interior is fantastic. This is a world car. Size is so important in many of these European markets. We are very excited about the changes.
You are not ever going to look at a design team that Gerry McGovern runs and see complete out-of-the-box changes. They will be a slow evolution. I think they've nailed this one.
Has the Discovery underperformed?
To me, we probably weren't as good at pinpointing the advertising. We are finally on to getting the message out detailing how advanced the Discovery is. For example, the marketplace was not aware that you can lower the rear seats with your iPhone or from the navigation unit. Those are wonderful features that we did not do a great job communicating.
The upside is because that vehicle is built in Slovakia, we have more capacity than we have had in the past. If we can get the right message and boost the volume that will really help the retailer body. What's going on in China is volumes have dropped and that has made North America once again one of JLR's biggest markets. That helped us with Range Rover and Range Rover Sport volume and I think we'll see that continue in 2019 and beyond.
What's needed in 2019?
We have a tremendous opportunity with Discovery because of the increased volume at the Slovakia plant. If we can continue with great marketing support and the great messages we are hitting on right now, I think we have a great opportunity for that vehicle. Continuing the volume and support of Range Rover, Range Rover Sport and Velar — especially if China continues to weaken — that should be great help for North American retailers. We're all excited about the new Evoque. Defender is going to do exactly what I-Pace is doing for Jag, except we are going to get volume out of it. That will be a big uplift as all these new dealers move into their new facilities.
On the Jag side, continue with the I-Pace. Hopefully we'll get better lease points and marketing on the other SUVs. It should be a great year for North American retailers.
Is JLR doing enough to promote certified pre-owned sales?
They have really helped us focus and increase sales. We've seen dramatic increases year over year. On Land Rover from 2015 to '16, we were up 14 percent; in 2017, up another 9 percent; and we're up 12 percent in 2018. We've seen similar increases for Jaguar. From 2015 to '16, Jag's CPO sales were up 26 percent; in '17, 16 percent; and in 2018, 16 percent again. JLR is very focused on moving CPO sales.
Is JLR helping dealers prepare for a future that might include electric and hybrid vehicles, self-driving cars and a variety of mobility options that could change the retail landscape?
We have lots of conversations and special sessions as we plan for the future. JLR has a great commitment to hybrids and electric. As a group we spend a lot of time thinking about where the market is headed.
Will dealers have to make investments as the retail market changes, particularly in subscription services?
There are some bigger volume dealers putting their toes in it and touching the water, but it is too early for the whole dealer body at this point.
Are JLR dealers profitable?
As a whole, JLR dealers are very profitable.
