Phil Popham, Director - Group Sales Operations, Jaguar Land Rover, was previously the Managing Director of Land Rover, before being appointed to this post in December 2010. He joined Land Rover as a graduate trainee in 1988, during which time he completed a Business Studies degree from the University of Aston. In this recent interview at the Frankfurt Motor Show, Popham talks about JLR’s sales and the road ahead. Edited excerpts from the interview.
Sales have been good this year, so far this year. What is it due to?
We are about 16 per cent up year-to-date, 28 per cent up in August, which is an all-time record for Jaguar Land Rover for August. And, growing in all regions. We have split ourselves into six regions – UK, rest of Europe, China, Rest of Asia-Pacific, North America and Overseas, which is a big area but doesn’t fit into any logical geographical area. All regions have grown, all vehicle lines have grown this year. This has been exceptional so far.
We are certainly not feeling that in the premium segment. Because we have got 130 dealers operational now in China, but we have appointed 200. We are moving into geographical territories and tier-2, tier-3 cities that we have not been represented in before. There is some slowing, but is still a rapidly growing car market at the moment. The importance for us in the balance of business, we don’t want to be over-dependent on one region. We are in a fortunate position at the moment where demand far exceeds supply for our products. We are balancing that. We are trying to break capacity constraints by going to three shifts, by investing in significant infrastructure in the UK and overseas. We still have supply constraints and we are balancing that across the world.
We have got 170 dealers in the United States. It is really all about geographical coverage. Wherever you have a huge land mass, you need a large number of dealers and they all balance with volumes. Russia is a good example. There are 13 time zones in Russia and in Russia you have to accept small dealers, the further east you go.
Where does India fit in for JLR?
It has got huge potential as a market. The economy at the moment and the volatility of the exchange rate is making it difficult for European manufacturers. We have got a good footprint, excellent dealers. Ownership by the Tatas has given that a huge advantage there, of the desirability of the business from the investors, they have got some brilliant facilities around the country. We have made investments in Pune for KD (knocked down kits). XF and Freelander being built there to get price points right for India. It is a market where we see long term potential. Short-term, it is just difficult to grow it rapidly at the moment, because the premium segment is just not growing. But I think we will have the opportunity to, because of Tatas influence and Tatas infrastructure there, to grab that market when it grows. It will come. We all thought the premium market was going to grow a lot quicker last couple of years, but it hasn’t done because of the slowing down of the economy.
Are you looking at any more local assembly of other products?
Not at the moment. As the economy grows, as the premium segment grows, we will make the right investment to exploit that market.
You had mentioned earlier that you are looking to create infrastructure both in the UK and abroad. Could you give us some idea of your plans in China?
What I mean by infrastructure is the dealer network. Over the course of the last three years, our dealers have invested about a billion Pounds on facilities and they will invest another billion Pounds over the next three years. We have gone from about 2,200 dealers to just over 2,500 and in the next three years, it will be over 3,000. Lot of those dealers are in the new, growing markets. We have got 130 operational in China, and we will be over 200 in that timeframe.
We are also appointing new dealers in Russia, Brazil and across mainland Europe. Eastern Europe is an important market as well, all of Asia-Pacific, Africa, we have seen quite a lot of growth. And because of the business performance of Jaguar Land Rover, the brands and the business, we are attracting a lot of people who want to invest in the franchisees.
As we start to grow that volume, you have got to have the infrastructure in place to look after the customer, parts distribution centres, training academies, national sales companies. And we have got in my team, in the region of a 1,000 people that are actually based overseas, as well as having engineering, manufacturing, purchasing people. Big investment on our part in becoming a real, global player.
What about the plant in China?
That is a joint venture with Chery Automobile, well on its way to being finished. We will be producing vehicles in 2015. Envisaged that we will have a capacity of 150,000 but protecting for growth beyond that. The plan at the moment is to produce cars in China for China. There is no plan at the moment to export any cars from China.
You had also talked of a plant in Saudi Arabia. Has any decision been taken on that?
No. We did issue a letter of intent with the Saudi government. We are on-going with negotiations and discussions there to ensure that it is viable. We are also in discussions with the Brazilian Government about the potential to manufacture there. It depends on a number of things. It is about where we see the market growing, it is about incentives, it is about tax structures, import duties, really getting an understanding of the long-term benefits and opportunities to make a decision. And, we haven’t got a clear picture of either of those there.
So, it could be a toss up between Saudi Arabia and Brazil…
I don’t think it will be an either-or. We could do both. It depends on the business case. It could be neither, it could be both of them. At the end of the day, we are still fairly small in automotive terms. So, every cost to Jaguar Land Rover has an opportunity cost. We have to optimise that spend and make sure that every Pound we spend is an efficient spend.
Is Brazil a growing market for you?
Land Rover has been for quite a long period of time the leading premium brand. I don’t mean the leading SUV brand. That also include the premium brands in their entire range. Good dealer network, the SUV market is strong, the Land Rover brand is a strong brand, it is a totally appropriate product for the Brazilian market. We believe that to keep that momentum going, then we may have to manufacture some products there.
Where do you see the market itself going, for premium SUVs and sedans?
Despite the global recession that we are beginning to come out of, the world has become a more affluent place. There are more and more affluent people. The products have substance, they have got to be leading in terms of technology, they have got to be fuel efficient, because people want to spend less running their cars. They have got to be the leading edge in terms of design, in terms of technology. If you couple that with great brands and great heritage, then you are on to a winner. We believe we have got both. Brands of distinction with a rich history, that are making fantastic products with leading edge in terms of technology, like the cars on our stand, a combination of that and perhaps a little bit of smart marketing as well, communicating consistent positioning around the world, that is also one of the major reasons for the growth of Jaguar Land Rover.
There is also the growing emphasis on reduced emissions. Is that a trend that we will see going forward across premium sedans and SUVs as well?
One thing for certain is that customers, whether they are aware of emissions, in terms of COs, or fuel efficiency, they want to spend less money running their cars. They expect manufacturers to solve the dilemma that they have got. Fuel prices are going up generally around the world. Cost of ownership is going up. They want the manufacturers to solve that problem. You add to that regulations around emissions, taxation around emissions, whether it is greenhouse gas or whether it is fleet average in Europe, similar type of approach that China is going to take, the cars generally have to become more and more fuel efficient.
Land Rover is making a significant investment in terms of lightweight architecture. We believe that will give us the biggest bang for our buck short-term.
Adding other technologies. The nine-speed automotive that has just gone into the Evoque, the Active Driveline, which basically flips between two-wheel drive and four-drive to optimise traction and fuel efficiency as well, hybrids that are going into Range Rover and Range Rover Sport, ultimately electric cars with battery technology improves, there is no single solution to that.
Over the course of the last three years, we have employed 3,000 extra engineers and a number of those are advanced engineers looking at technology way into the future. Working with a number of institutes such as Warwich University on long-term technology.
But all these will obviously come at a cost. Are customers prepared for that?
There is some technology that they are not willing to pay for. And that is one of the dilemmas of hybrids at the moment. It is huge investment in terms of technology and engineering, the piece cost, material cost is pretty high and very few customers at the moment are willing to pay that. That is actually why our approach, certainly our initial approach, on hybrids is to put them on Range Rover and Range Rover Sport, and it has taken us a while to engineer those products because there is demonstrable benefits associated with not just emissions.
It is 169 g per km, which is significant reduction on a Range Rover and Range Rover Sport, fully capable offroad, and the instant torque that you get on an electric motor enhances the offroad capability. When you get the conventional engine and the electric motor working together, you get better than V8 diesel performance with a V6 diesel, with 25 per cent less emissions. We do it in a very Land Rover way.
The biggest benefits are on the bigger, heavier cars, but we will provide the customers with something else, not just fuel efficiency, but performance as well, both onroad and offroad, and because of that, they are more likely to pay for it. You got to provide them with a demonstrable benefit feature, something the car wouldn’t have without it, if they are willing to pay for. We certainly have a good combination on the Range Rover and Range Rover Sport.
>ramakrishnan.n@thehindu.co.in
( The writer was in Frankfurt at the invitation of Jaguar Land Rover .)