Long-wheelbase Jaguar XF is still among JLR’s best-sellers in China
JLR got ahead of pain points hitting rivals in China and now it is ready to roll out value-over-volume plan
Most European premium brands including BMW and Porsche have suffered badly in China in recent months, but not all.
JLR was actually bullish about its future in the country at its recent investor day held in June. So how did a company that has experienced well-documented problems in the world’s largest car market in recent years finally get it right?
“Unlike other OEMs, we are not signalling a problem in China. Now I expect to start seeing growth coming back into that market for us,” new CEO PB Balaji told investors.
The market has long proved a rich seam of gold for JLR’s imported models leading with the Range Rover, Range Rover Sport and Defender. That was still the case in the company’s financial year ending March, when the average selling price of its imports – mainly from the UK – hit £105,609.
That figure was up by over £10,000 from five years ago in a market that is famously driven by discounts. “Today, we sell 16,000 Range Rovers there annually without batting an eyelid. And we are amongst the lowest in terms of VMEs [discounts] that we put in that market,” Balaji said.
Look at sales figures alone and JLR’s situation looks as bad as someone like BMW, who issued a profit warning in June after sales took an unexpectedly big hit in the country, down 15% to the end of May.
JLR overall retail sales in the country fell 25% to 62,400 in the financial year, a loss of some 20,000 vehicles, with a greater fall of 35% in the three months to the end of March.
But in that figure are almost 25,000 vehicles built locally by company’s joint venture with Chery, led by the Range Rover Evoque and – still – the Jaguar XF long-wheelbase.
That side of the business has long suffered amid the “killing fields” of mass premium, as CFO Richard Molyneux memorably described it, with discounts dragging down the average selling price of the smaller China-built models to just £34,738 in the last financial year.
“The challenge in the market happened in terms of the lower end cars,” Balaji said.
That joint-venture side of the business helped pushed China to become JLR’s biggest global market, selling a record 87,774 models built in the Changshu, Shanghai, plant in the 2018 financial year. But it has often come at immense cost to the company, most famously contributing to a £3.1 billion writedown in the 2019 financial year after overstuffing the Chinese market.
Only in recent years have the JV losses been stemmed after JLR cut back on volumes, but profits have been small and inconsistent, most recently £10 million in the 2026 financial year. It hasn’t generated a dividend for JLR in the last five years.
The smart solution JLR has devised is to hand the development of models for the plant over to Chery, which earlier this year launched the first of a “portfolio” of Freelander models to built there. JLR receives a royalty payment and gets to gracefully exit a 12-year chapter in its history that generated mainly headaches and not much profit. Production of the last JLR models in China – including the Jaguar XE and XF – end in September.
Essentially JLR has already been through the pain and solved the problem that is just starting to properly hit the bigger premiums like BMW and Audi. Their bigger footprint in the country and its continued outsized influence on the balance sheet foretells a larger battle ahead as premium customers continue to shift to electrified models from local brands and away from the mainly combustion engine offerings from European brands.
JLR can now follow Porsche in restricting sales to high-end valuable imports via its shrunken dealer network at a level the market will take, without needing to push too hard. “With the volumes of the [locally-built] models also going off, it’s a much smaller but more profitable and extremely powerful set of products there in the market,” Balaji said. “It’s more about now build back, but build back gradually. Don’t be in a hurry, because the market will take its time to settle itself.”
JLR is now looking to the US – it’s new biggest market – to provide the bulk of luxury sales that will drive margins in coming years. On analyst pointed out that back in 2022 JLR had made the same claims for China, which didn’t materialise. “The market has also changed dramatically,” Balaji said. “I don’t think in ‘22 there was a major callout in terms of the local OEMs going up to a 60% plus market share.”
Problems remain. JLR’s import business in China is now all combustion engine powered after it pulled plug-in hybrids from the market, along with all other European premiums. For now luxury customers are content to stick to ICE but even that’s dropping, with JLR wholesales (ie its import business) down 27% last year and 30% in the three months to the end of March. The delayed Range Rover and Range Rover Sport electric models are coming, potentially by the end of the year, but it remains to be seen how persuasive they’ll be against some pretty impressive local competition.
Meanwhile changes to the 10% luxury tax China imposed July last year dragged in all Range Rovers after the threshold shifted from 1.3 million RMB (£145,000) to 900,000 (just over £100,000). JLR admitted that, like the US tariffs, it’s a tax hike they can’t price in.
What JLR does have going for it in China is the strength of brand, with the Defender particularly still the benchmark design seven years after launch. “I probably will not exaggerate if I say there’s 100 copycats of Defender [in China],” chief commercial officer Leonard Hoornik said. “But if you are in a Defender at a traffic light, and there is a lookalike Defender next to you, the magic of what we do is that person looks at you and thinks, I want to be in that Defender. And you, in a real Defender, you look at that car, and say, ‘I would never want to be in that’”.
