Tata Will Get Near-Death Jaguar, Recovering Land Rover from Ford In U.S.
March 26, 2008

By Michelle Krebs

The long-awaited deal that hands British brands Jaguar and Land Rover over to India’s Tata Motors from Ford is finally done.

So what does Tata get from Ford, at least in the U.S.?

Edmunds.com’s analysis of sales, market share and manufacturer incentives shows Tata has one nearly dead brand with Jaguar; Land Rover appears in recovery but with the cost of its meds climbing.

Jaguar: The English Patient Dying in America
In the U.S., Tata needs to haul in the crash cart to resuscitate Jaguar; its stats look like the plummeting blood pressure of a dying patient.

In 2002, Jaguar sold 61,204 cars. In 2007, it sold a scant 15,647 cars.

Market share, which stood at 0.4 percent of the U.S. market in 2002, barely registered on the charts at 0.1 percent in 2007.

In the years between 2002 and 2007, Jaguar’s sales dropped annually by double digits. So far in 2008, the slide continues. Jaguar sold a measly 664 cars in January. That’s about 10 percent of a good month in 2002. February sales edged past the 1,000-unit mark but still were off 11 percent from the awful year-ago February. For the year so far, Jaguar has sold only about 1,700 vehicles.

"While other luxury brands have witnessed healthy increases in market share since 2002 — some as high as 0.5 percent — Jaguar is the only pure luxury brand to show a decline," said Jessica Caldwell, Edmunds.com's manager of Pricing and Industry Analysis, adding Saab and Lincoln show ever-so-slight declines. "No other brand today has come close to losing such a high percentage of sales — a 75 percent sales drop from 2002 to 2007 — than Jaguar."

Jaguar’s life support has come in the form of richer and richer incentives, Edmunds.com’s analysis shows. Jaguar’s Total Cost of Incentives (TCI), a proprietary formula for calculating incentives, were relatively reasonable in 2002 — $2,841 for every Jaguar sold.

However, Jaguar tried to stop the sales freefall in the following years with dramatically higher incentives that skyrocketed to a whopping $6,648 TCI per vehicle in 2006, among the highest in the U.S. auto industry at a time when automakers, including its then–parent company Ford, were trying to scale back incentives. Jaguar trimmed its TCI to $4,476 per vehicle in 2007; perhaps figuring the incentives weren’t doing much good anyway.

Opportunities for luxury cars are clearly out there, especially in the flourishing emerging markets of Brazil, Russia, China and India where newfound wealth is growing sales of luxury cars. It's an opportunity that thus far has evaded Jaguar.

Land Rover: In Fragile Recovery
Land Rover is a healthier story in the U.S. at the moment, but its future is iffy.

In 2002, Land Rover sold 40,987 vehicles in the U.S. It closed 2007 with sales just shy of 50,000 — 49,550 vehicles, to be exact. Sales slid in 2003 and 2004 but have shown steady improvement ever since.

Market share has held relatively steady at 0.3 percent of the U.S. market.

Still, Land Rover has been adjusting the dosage of its incentive meds to help sustain its health. In 2002, Land Rover’s TCI was $1,631 per vehicle. That dipped a bit in 2003, soared to $2,630 in 2004, fell to under $1,000 in 2005 but, like its sales, has been steadily increasing in the past three years. For 2007, Land Rover’s TCI per vehicle was approaching its 2004 record levels, closing 2007 at $2,146 per vehicle.

Though Land Rover sales have edged higher, the brand still faces trouble by the very nature of the products it sells — only sport-utility vehicles, a segment hardest-hit by soaring gasoline and diesel prices. "With no end in sight to the soaring fuel prices, it's hard to make a business case for Land Rover," said Edmunds' Caldwell.

Land Rover showed a crossover it intends to build to address the changing tastes of the market. But the iconic British marque faces the same dilemma Jeep did. The Chrysler brand, long famous for its rugged "Trail-rated" models, added softriders to its mix. The result was it tarnished its image and now is trying to undo the damage. In contrast, Porsche, much to the chagrin of purists, survived and flourished because it added the Cayenne sport-utility to its sportscar portfolio.

Whatever Tata decides for Land Rover, it will be a risky dance.•

Jessica Caldwell, Edmunds.com's manager of Pricing and Industry Analysis, provided the analysis for this report.

Posted by Michelle Krebs at 12:04 PM under Analysis , Business , Companies , Ford | Comments (5) | digg this | Seed Newsvine