Jaguar Land Rover's plans for electric future
Tata Motors-owned JLR now aims for zero tailpipe emissions for 100% of Jaguar sales and 60% of Land Rover sales by the year 2030.
Thierry Bolloré, chief executive officer (CEO), Jaguar Land Rover (JLR) announced this week that sustainability will live at the centre of everything they do from materials, engineering, manufacturing, supply-chain, investments and services.
This comes close on the heels of General Motors announcing its zero-emission target by 2035. Volvo is aiming for 50% of car sales to be fully electric by 2025 and full electrification by 2030. German car giant Volkswagen has also gone all in on electric vehicles.
Phew. That pretty much covers many of the popular cars that run on roads around the world.
Companies are cutting off future investments on internal combustion engines (ICE) - the century-old technology is now on a path to its slow demise.
And while Jeremy Clarkson may go on whining about electric cars, calling them unpleasant and stupid almost everywhere - things are changing fast.
Two factors drive this accelerated move to electric vehicles - capital markets and legislation.
The pandemic and the ensuing economic recession have been a huge catalyst for a greener economy with a greater focus on Environmental, Social and Governance (ESG) initiatives. This has driven capital allocation, and consequently, huge valuations for new mobility businesses like Tesla, Nio, CATL or Uber.
By selling just cars, OEMs will be under tremendous pressure as profit pools are shifting. The established players in the auto industry will have to let go off many of what they hold dear and what works today. They must rebuild their plants and machinery, workforce, business models and practices to come out of the churn stronger.
Many now view this as a moment of “creative destruction” where gains will come out of pains.
Joseph Schumpeter, Austrian political-economist, had described how the “gale of creative destruction” results in “lost jobs, ruined companies, and vanishing industries,” but from that devastation spring economies that may “grow more productive and richer”.
To make that happen, and to tackle climate change, governments across the world are waking up and bringing in appropriate laws.
Legislation is forcing JLR's departure from internal combustion engines according to automotive analyst, Matthias Schmidt. Schmidt adds that 2036 will witness the phase-out of the internal combustion engine across the European Union (EU). The expected average CO2 cut, due in 2035, will be so severe that it will de facto result in the ban on internal combustion engines across the region.
Paris 2050 targets will also require roughly a 15-year window to clean-up the vehicles in circulation. The leeway on emissions given to niche manufacturers of up to 300,000 vehicles in the EU (JLR sells less than that) will take place between 2026-2028.
The British company announced a new global strategy – reimagine to embrace electrification, data-driven technology and radical digitalisation of the entire customer journey and ownership experience.
Thierry Bolloré emphasized that electric will benefit JLR’s luxury brand as the technology will enable it to offer a more comfortable and smoother ride while increasing design flexibility.
The first all-electric Land Rover will roll out in 2024 while by 2026 diesel will be phased out.
While electric is coming to the centre, the company feels fuel cells could be a complimentary technology and will begin testing prototype mules on UK roads this year. These are early days for hydrogen fuel as it is yet to prove that it is energy efficient or cost efficient.
In the next five years, Land Rover will offer six pure electric models.
In its transition to a battery-first business, JLR will move from five platforms to three, two for Land Rover and one for Jaguar. The first platform will be the Modular Longitudinal Architecture (MLA). It will deliver electrified internal combustion engines (ICE) initially and full electric capability later.
The second Land Rover platform electric modular architecture (EMA) will be developed for electric vehicles and support advanced electrified ICE powertrains. Future Jaguar models will be built exclusively on a pure electric architecture.
As noticeable, JLR will consolidate the number of platforms and models being produced per plant.
This could mean a lot of repurposing of its facilities.
Solihull will house MLA as well as future Jaguar battery electric vehicle platforms. Halewood will be the destination for the new EMA architecture. At Castle Bromwich, existing models will be produced till the end of their lifecycle and it will be repurposed to consolidate operations scattered across midlands of the UK.
Castle Bromwich will now be the hub of an increased focus on bespoke JLR vehicles under its Special Vehicle Operations division.
Gaydon, the corporate headquarters and a key R&D centre will become bigger after consolidating non-manufacturing activities scattered around the UK.
Data is the backbone of new products, manufacturing, and supply chain. JLR has thousands of software engineers in the UK, Ireland and China and their strength in the engineering workforce will grow from 25% as of now.
The company will increase its partnership with software companies of the Tata Group while also increasing collaboration with group companies in energy and communications.
JLR announced that its subscription model, Pivotal, will now be extended to new markets. Mind you, Pivotal, born out of JLR’s incubator and investor arm, InMotion is a profitable business which has grown 750% during the fiscal year in the UK. It costs GBP750-1600 per month (where GBP 1 is INR 101).
To become a more agile business, a flatter cross-functional organisation structure is being created to empower people and enable them to act with speed.
To create a seamless customer experience, there will be one team reporting directly to the CEO working across the world across channels, touchpoints, and brands.
JLR will spend GBP 2.5 billion annually with a focus on electrification technologies and on data-centric technologies for consumers and businesses alike.
These strategies, the CEO hopes will bring JLR on a path towards double-digit EBIT margins and positive cash flow, with an ambition to achieve positive cash net-of-debt by 2025. JLR will elaborate on this roadmap in its annual Investor day on Friday, 26th February 2021.
Currently the company is working closer to 4% EBIT margin on an annual basis (excl one-offs) and double-digit margins is a tall order which was last seen in FY15.
Competition in the luxury segment has since increased considerably and it is yet to be proven that established companies will journey through the creative destruction of existing business models and embrace new business models around data and services with electrification providing a better platform to pursue those goals.