JLR's Eberhardt sees some upside to chip shortage

DETROIT — If Joe Eberhardt gets his way, the chip shortage that is thinning Jaguar Land Rover's inventory to historically low levels will have permanent implications.

Eberhardt, CEO of JLR's North American operations, says he never wants to go back to stocking 35,000 vehicles on the ground in the U.S., roughly a 90-day supply of Land Rover's upscale light trucks and Jaguar's luxury sedans and crossovers. Now, inventories of some of the company's hottest-selling nameplates are at 10 days, Eberhardt said.

Speaking last week on the sidelines of a media event at a racetrack in the Detroit suburb of Pontiac, Eberhardt said low inventories combined with strong sales have Jaguar and Land Rover dealers banking some of the highest profits per vehicle they've ever seen, and custom orders for Range Rovers and other vehicles — often sold at full price — are now approaching 30 percent of forward sales.

"The challenge for us will be to accurately forecast what the real demand is, then have the discipline to actually flex the production once we have availability to be aligned," he told Automotive News. "We don't want to push cars in the market."

Eberhardt said JLR's U.S. inventory is between 10,000 and 15,000 vehicles lower than normal.

"We are severely understocked at the moment, but it's a good problem to have. It increases our order bank," he said. "Traditionally, as we sold from stock, we had only a very few cars where we actually took orders, such as Range Rover. We have right now about 30 percent of forward volume is customer orders. That means customers are willing to wait — within reason."

Eberhardt worries that as soon as the chip shortage ends and industry production cranks up to full volume, inventories will return to pre-pandemic and pre-shortage levels. The situation in North America is being watched closely in the U.K. as the company reinvents itself under Thierry Bollore, who took the global CEO helm in September.

But keeping inventory too low also could cause problems, Eberhardt says.

"That's the discussion I have daily with the board. They say, 'We should do that going forward.' I say, 'No, don't get too excited about this. The minute the floodgates open with our competitors, the American psyche will still be: 'I want this now.' "

Jaguar Land Rover's hottest sellers are the usual suspects: Range Rover and Defender large SUVs. Land Rover says it has sold more than 16,000 Defenders in the U.S. since the vehicle launched last summer. Volume for the Range Rover, in its last model year before a new generation is launched in 2022, is up slightly, by 62 sales to 4,244 in the first quarter of this year compared with the same quarter in 2020, before the COVID-19 pandemic set in.

Even though all Jaguar models, except the XF midsize sedan and F-Type sports car, have seen lower sales this year, incentive spending has declined, too. In April, Jaguar spiffs were down 33 percent from April 2020 to an average of $6,530, according to Motor Intelligence. Land Rover's spend fell 20 percent to $4,435.

"It's been fantastic for profitability. Our retailers are enjoying record profits. Many of them are at historic all-time record profits," said Eberhardt. "The calls I get today are from retailers begging for cars. That's not healthy, and we shouldn't be in that position. But going back to where we were before is also not healthy."