Jaguar Land Rover’s decision to shed 4,000 jobs comes after the carmaker has travelled down a very rough road.
The company has seen sales fall in all of its major markets and it has been dealing with the consequences of a devastating cyber-attack that paralysed production last year.
At the same time, it has been investing billions in an effort to reinvent itself for an electric future, in which it is likely to face intense competition from aggressively expanding Chinese brands.
Executives have now decided a major overhaul is needed.
One of the main concerns for JLR is China. Not so long ago, it was seen as a land of opportunity for western carmakers, where the rapidly expanding middle classes seemed to have an inexhaustible appetite for upmarket foreign-badged vehicles.
JLR, along with other European brands such as BMW, Audi and Mercedes Benz, was all too willing to meet that demand, at a time when the European market was extremely crowded and growth hard to find.
Today, things are very different. The past decade has seen rapid growth among domestic Chinese carmakers, firmly backed by their government, which has been determined to make the country a leading player in electric vehicles.
This has created an environment of intense competition, in which local manufacturers have rapidly raised the bar in terms of technology and development speed.
That, combined with a slowdown in the Chinese economy, has made China a much more difficult market for European brands.
JLR’s sales in China fell from a high water mark of 146,000 cars in 2017 to just 62,400 in the last financial year. At the same time, competition and a new luxury car tax have hit profit margins.
All of this has resulted in a sharp fall in revenues from the region. JLR is not alone in this; the Volkswagen Group, for example, has also seen its earnings in China pummeled – a major factor in its decision to axe 100,000 jobs by the end of the decade.
The state of the Chinese market has had another consequence for European carmakers, including JLR. Faced with cut-throat competition, they have been flexing their muscles abroad.
Companies such as BYD and Chery have been rapidly gaining market share in the UK and Europe – with the Jaecoo 7 the third best-selling car in this country over the first half of the year.
Analysts say traditional brands will face an uphill struggle to compete with new rivals, who can sell cars more cheaply and develop them more quickly.
