December 2012 | Christabelle Noronha
‘Good products are the best way to ride out a storm’
Jaguar Land Rover (JLR) has been at the top of its game in recent years, emerging from troubled times to reclaim its rightful place among the elite of the motoring world. And chief executive Dr Ralf Speth, who has guided and overseen this change of fortune, has plenty to be pleased about. He talks here to Christabelle Noronha about what JLR has done to get its automotive equation right, and how it plans to keep the momentum going. What emerges clearly is his — and the company’s — refusal to rest on hard-won laurels.
About a year back JLR was betting big on further strengthening its growth and profit numbers. Have you met your expectations?
Based on its attractive product portfolio, JLR has been able to exceed its expectations, with strong sales figures being translated into solid financial numbers. We achieved a turnover of £13.5 billion (about Rs1.16 trillion) in 2011-12 and profits increased to £1.5 billion (about Rs129 billion). This positive trend continued in the first and the second quarters of 2012-13.
What was the logic driving the decision to invest £370 million (about Rs32 billion) to upgrade JLR’s manufacturing facilities?
All the three JLR plants in England are running three shifts. We are setting up a new engine plant with an investment of £355 million (about Rs30.6 billion) near Wolverhampton. The £370-million upgrade is for plant enhancement and improvements for the new, all-aluminium Range Rover sports utility vehicle (SUV), the industry’s first all-aluminium SUV. It is about 180kg lighter in body weight and 420kg lighter overall when compared with the equivalent outgoing model. Range Rover defined the SUV premium market and will continue to set the benchmark. We are committed to investing in innovation and technology so as to achieve the best product attributes and specifications. Overall, we spend more than £2 billion (about Rs172.5 billion) a year on product creation.
What was the response to the Jaguar F-Type and the all-new Range Rover at their recent Paris Motor Show debut? What are your expectations from these two products?
The two vehicles are the new stars in our product firmament. They feature the best of British design, combined with the latest product and operations technologies and outstanding drivability. The Range Rover handles and steers like a performance car and the F-Type is a dream machine. I expect these two automobiles to set the benchmark in their respective segments. The F-Type was nominated as ‘best in show’ by Autoweek and has also won accolades from other respected automotive publications.
What’s the significance of the company’s research on the electrification of its premium vehicles and other initiatives on reducing the carbon emissions of its vehicles?
Modern mobility requires reduced fuel consumption and emissions. The automotive industry faces one of its toughest challenges — and one of its biggest opportunities — when it comes to reducing carbon emissions. There is no single technical solution here; a multifaceted approach is required. I still believe that pure electrification is not the solution right now. Hybridisation may guide the way forward but; even more importantly, we will see further improvements in established drivetrains.
JLR recorded sales growth in excess of 150 percent in the Indian market in 2011-12 and you have an aggressive dealership expansion project in the country. How do you see your India operations growing?
Both Jaguar and Land Rover products are being well received in India, where we are seeing our strongest growth globally, albeit from a low base. We are investing in a stronger dealer network to provide our customers improved accessibility and a premium brand experience. In addition, we started an assembly operation in Pune last year and are very satisfied with the progress and high quality of this operation.
Coming to global sales, does China remain the most important market? What about markets such as Russia and the United States?
The industry’s winners and losers will be defined in China, so, undoubtedly, China is important for JLR. From a volume perspective, China is ranked second, behind Europe. The opportunities for China to overtake Europe’s sales volumes are real, given the current economic situation in Europe and the recent growth rates seen in both regions.
Russia is a very volatile market, with big swings in demand, but we have experienced notable year-on-year growth during 2012. As for the United States, Jaguar is ranked in the JD Power survey as the fastest improved brand and both brands are ranked in the top six of the APEAL (Associates Automotive Performance, Execution and Layout) study. We see a positive trend in the United States, but are aware of the so-called ‘fiscal cliff’, which could slow the market down again.
In your previous interview with Tata Review, you said that JLR was in the middle of a large recruitment campaign in England and elsewhere. How has this drive been going?
Over the past two years, we have hired some 8,000 new employees, the largest recruitment campaign in JLR’s history. We have encountered, in particular, difficulties in getting specialists with advanced skills across many functions, especially in technological areas. Therefore, we have also taken action to attract new talent through our graduate and apprenticeship schemes. JLR is one of the most attractive options for graduates in England and we were able to add 312 graduates to the business in September 2012.
How have the recessionary winds in Europe and elsewhere affected JLR, and how are you coping with the slowdown?
The automotive industry, generally, is tackling overcapacity — especially in Europe — alongside margin erosion, economic challenges and currency imbalances. Despite these critical factors, JLR has grown by around 40 percent in the year up to now (October 2012). We are cautiously optimistic, but we don’t know whether there is an even more aggressive ‘black swan’, something unexpected that might create a more volatile external environment. That said, good and competitive products are the best way to ride out a storm.
What kind of challenges does JLR face in staying at the top of its game in terms of the design and features of its products?
The key to staying on top of our game is maintaining a ‘customer first’ focus. We have geared up to produce the right models for the right markets. This is vital since exports account for 85 percent of our revenues. To give three examples: we have produced an all-new V6 engine to expand Jaguar’s penetration in the American market; an efficient new 2.0 litre petrol engine specifically tailored for China and other overseas markets; and the new XF Sport Brake as an ideal product to grow our European business.
What is the progress on JLR’s exploration of opportunities to increase its collaboration with Tata Motors in various spheres? Has the time come for a sharing of platforms between JLR and Tata Motors?
We are not only exploring opportunities with Tata Motors but are also interested in intensifying the collaboration with other Tata companies. There are many opportunities in the back office and information technology areas.
JLR and Tata Motors occupy very different places in the car market. Consequently, we cannot share platforms in the old and common sense of the terminology. However, we can support each other in many ways, like setting up an operational and sales footprint in India, or by improving our processes through the Tata Business Excellence Model.
JLR has announced major plans for India. Can you elaborate on how this will pan out in terms of investment and new product launches for the Indian marketplace?
We see huge opportunities in India in the future. We have set clear objectives and have defined an ambitious strategy. JLR and Tata Motors can play a major part in modern Indian mobility.
This interview is part of a series focusing on the year 2012. The chief executives of 12 Tata companies open up on the challenges they face during tough and demanding times for businesses across the world, and the opportunities they expect to make the most of. Read the other interviews in this series >>