• Demand and Supply: Demand remains strong in JLR, with a record order book of~127k units. The semiconductor shortage situation remains dynamic. However, JLR expects a gradual recovery starting 2HFY22, with higher production (by ~50k units) in 3Q from 2QFY22 levels.
  • Inventory fell by 50k units YoY at the JLR and dealer level. Dealer inventory stood at 27k units. It will have to build 30-40k units of systemic inventory (of which 66% will at the dealer level), in addition to servicing its order book of~127k units.
  • BEP stood at 85k units/quarter in 2QFY22. The management expects it to fall further to 70-75k in 3QFY22 due to a better mix. Underlying BEP will be less than 85k/quarter v/s 90k in 1HFY22 and 100k in FY21.
  • Its refocus program has delivered GBP500m in 1HFY22 (GBP300m/GBP200m in market performance/investment savings), of which GBP300m was in 2Q alone (GBP150m each in market performance/investment savings). The management expects to further reduce average material cost per car by GBP1,000 in FY22.
  • VME to remain lower than normal levels of 4-5% for a longer period as there is a substantial mismatch between demand and supply. The management’s focus is on lowering warranty costs to sub-3% levels (from 3.2% in 2QFY22). Underlying warranty cost has been ~3.2% over the last four quarters.
  • Emission compliance: As the PHEV mix improves (with the resumption in normal semiconductor supplies), it will comply with emission norms in the UK and EU. In the US/China, which is a RR/RR Sports market, it will continue to buy credits from other OEMs. In CY21, it expects to purchase GBP37m in credits for the UK/EU and GBP59m for the US/China.
  • New Range Rover: Run-out for the new RR will start in 4QFY22, but wouldn't have any negative impact as demand for RR remains strong. The initial response to the new RR has been very positive, with the average transacting price for the pre-order at GBP126k.
  • There was no change in the management’s guidance for 2H and beyond, except a reduction in its FY22 investment to GBP2.3-2.4b (from GBP2.5b earlier). Of the planned restructuring cost of GBP500m, it has paid out GBP55m in 1H and plans to pay out GBP400m in 2HFY22.
  • JLR was the most improved OEM (13th place) in the recent JD Power US Initial Quality Study and bagged the numero uno position in the JD Power US APEAL study. LR stood second in the China Customer Satisfaction index.
  • JLR’s China business witnessed a significant improvement in its import business, with a focus on the quality of sales. It is now exercising the same levers in the CJLR JV, with a focus on quality of sales, and implemented Project Charge from 4QFY21 (to lower the BEP). CJLR’s import business is lagging by 12-18 months.


Found this article interesting? Follow Fetney on Facebook, Twitter and LinkedIn to read more exclusive content we post.