Compete, invest, repeat – the secrets of success for Jaguar Land Rover

 

Jaguar Land Rover has gone from strength to strength since being bought by Tata in 2008. It’s now the UK’s largest car manufacturer, doubling its sales and tripling its turnover since 2010. Former Executive Director, Mike Wright, explains how a commitment to innovative, long-sighted R&D and a balanced global growth strategy has driven that success.

About the author

Mike Wright stepped down from his role as Executive Director (including leading JLR’s financial services activities around the globe) at Jaguar Land Rover at the end of March 2016. His career in the automotive industry stretches back to Rover Triumph in the 1970s. In June 2014 Mike published an independent review of the advanced manufacturing supply chain, commissioned by the Labour Party. He is Chair of CBI West Midlands Council and the Advisory Board of Aston Business School.

Mike Wright

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The car industry is a globally competitive market, creating products that have to appeal to international customers. Both Jaguar and Land Rover brands have always competed in the global premium market, but competition today is far more intense than it was 10 or 20 years ago.

To make sure we compete, two things are essential to us: creating products and experiences that customers around the world will love for life; and creating a competitive global sales and manufacturing footprint.

A global balance

In 2008, Tata bought us from Ford for approximately £1billion. Since then, we have further developed our international spread, building on the strength of the brands and their resonance around the world, as well as the attractiveness of British design and engineering.

We’re also taking full advantage of the emerging markets – China in particular, where we’ve started extending our manufacturing footprint. As a British icon, some questioned our desire to add overseas manufacturing capacity to our well-established UK footprint, but it was a necessary decision to counter the activities of our overseas competitors. Our nearest German competitor had been in China for nearly 20 years, so we’re playing catch-up.

That global outlook means that we’re pretty balanced in terms of growth. Take China, for example. In Q2 and Q3 2015, everybody experienced some turbulence in demand. It was not quite a perfect storm, but it was pretty stormy. However, that was offset for us by growth in the US and Europe. China though remains a huge market – the biggest car market in the world and growing month by month. Our sales there are also growing – in March, year on year, sales in China were up 43%.

Over-investing to compete

If you’re going to compete in the premium car market, you need to have great cars. If you’re going to have great cars, you need to invest upfront in R&D. We reinvest the majority of our profits back into the product.

When we became part of Tata, we jointly agreed that we needed to invest disproportionately in upfront engineering and R&D. To date that’s been in the region of £12billion in the last five years. Tata’s belief in the upside potential for us to grow the business and the extraordinary vision of (former) Chairman Ratan Tata is the foundation of that.

Meeting growing expectations

There are big changes in the industry, with new entrants joining the more established manufacturers. That increases both competition and expectations. I’m old enough to remember when air conditioning was an expensive option – now nobody would buy a car without it.

At the end of the day, cars are about mobility: but they’re also part of a whole connected world and there has to be some convergence. The challenge is to understand what the customer really wants. For today’s consumers, for example, Wi-Fi and Bluetooth connectivity are as important as fuel consumption. Our submission is that our customers are brand loyal - they want everything that they can get in another premium car, but they want it in a Jaguar or a Land Rover.

We compete in and routinely win international awards for all our product launches, the result of long term planning and research, so our investment needs to support that. We have research capability here in the UK (the largest by far in UK automotive), and augment that with international capability, for example our small operation in Portland, Oregon, where we can access the kind of technology that’s coming out of Silicon Valley.

A commitment to excellence

Whilst the recent growth against our own history has been quite significant we’re still relatively small in the global car market, so there’s a lot more potential and we have the ambition to grow. To stay on top of our game, we’re absolutely committed to designing engineering with the latest technologies and the best performance.

Having the right people throughout the business is essential. Our engineering centres at Whitley and Gaydon employ around 10,000 engineers using the latest capabilities. Our CEO, Dr Ralf Speth, is a passionate leader and the driving force behind our partnership with Warwick Manufacturing Group, to deliver our advanced research capability. Looking ahead, we’re investing over £50million in the National Automotive Innovation Centre at Warwick to make sure we’re at the forefront of new developments.

The virtuous cycle

At present, the UK has strong capability in the auto sector – it’s going from strength to strength and it’s rewarded by sustainable and repeated inward investment. Our overseas competitors continue to invest in manufacturing and assembly capability here. These are international businesses with choices - and they’re choosing to come to the UK.

The automotive industry is caught up in a virtuous cycle of investment and competition. If you’re in the advanced manufacturing sector, you can’t rely on your home market to generate enough revenue to allow you to make or invest in complicated, leading edge manufacturing. You have to have a global market and if you’re not internationally competitive, you’re going to run out of steam.

To thrive in the international world, the cycle of competing and investing is vital - and the strong growth of Jaguar Land Rover proves we have the capability and confidence to compete now and in the future.

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