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24 hours ago

by Jay Traugott Luxury / 11 Comments

Here's the secret to their success.

Jaguar Land Rover hasn't had it easy over the past few years. It never became the BMW and Audi rival now-former CEO Ralf Speth envisioned despite investing billions in new models and global facilities. His successor, Thierry Bollore, recently announced a plan that will see a dramatically scaled-back and EV-only Jaguar alongside a more well-funded Land Rover. Jaguar's inability to compete with the Germans forced Bollore to either kill it or turn it into an ultra-luxury brand with fewer models and higher profit margins. He chose the latter. Land Rover will make up the bulk of the company's future sales because that's where greater demand lies.

Land Rover demand and profits have never been higher, though this is the result of the semiconductor chip shortage crisis. The Land Rover Defender, for example, has up to a 12-month waitlist. JLR's North American CEO is not worried. In fact, he's thrilled.

Speaking to Automotive News, Joe Eberhardt revealed dealerships are recording some of their highest profits per vehicle in years along with plenty of custom orders for already high-priced Range Rovers. It's a situation where there's a lesson to be learned: he doesn't want to go back to the days when dealers had a 90-day supply.

"The challenge for us will be to accurately forecast what the real demand is, then have the discipline to actually flex the production once we have availability to be aligned," he said. "We don't want to push cars in the market."

The fact that JLR's US dealers are extremely understocked at the moment is a "good problem to have" because it forces buyers to accept what's available. There's not much room for negotiating.

The alternative is custom orders and this typically means buyers are loading up on the options. The downside is that buyers will have to wait several months. However, Eberhardt is concerned once the chip shortage ends, inventories will increase back to pre-pandemic and pre-shortage levels. It's a balancing act that's hard to juggle. Inventory that's too low directly contradicts Americans' "I want it now" mentality, and if they can't get that high-priced Range Rover or Defender fast enough, they could drift away to the competition.

Dealers continue to beg for inventory that's just doesn't exist right now but they're also raking in the cash. Eberhardt's new task is to find the ideal inventory figure that generates both demand and profit.