JLR expansion shows benefits of targeting right customers in downturn, says car industry analyst
Commenting on the company’s announcement, which follows the news last week that Honda is to cut 800 jobs in the UK, Stadler, who is associate professor of strategy at Warwick Business School, said: ‘JLR have added 8,000 jobs over the past two years. JLR targets exactly the right customers at the moment: rich people in growing car markets like China, the US, and Russia.
‘In mature industries like the car industry, positioning is particularly important and the recent announcements from Honda and JLR demonstrate why.’
‘Unlike Honda’s customers, JLR’s customers are people who are not hit by the economic crisis to the extent that they need to delay the purchase of a new car.’
He continued: ‘The new Range Rover Evoque model is a perfect example of this strategy. Offered as a two-wheel-drive version the model still has the looks and high-riding position of a 4×4. This allows JLR to charge a premium to customers who value the image of an off-road vehicle without ever needing its capacity.
‘Meanwhile, Honda is seeing demand in its European market continue to be low. Although production is up from 97,000 in 2009 to 166,000 in 2012 this is well below its 250,000 capacity. As Honda buyers fall into lower-income brackets and their models are particularly well suited for Southern European markets it is not surprising that the Euro crisis has had such a strong impact. Other manufacturers targeting the same market, like Peugeot, have also been hit hard.’
Professor Stadler also said that he believes the future for the UK car industry is bright, saying that previous concerns over high labour costs, lack of skilled labour and tough environmental regulations are no longer a great weakness today.
He added: ‘The first will be less of an issue in coming years as automation reduces the importance of labour costs. The second is less of an issue during the current recession as more engineers are looking for jobs, and the third turns out to be an advantage as UK manufacturers are ready for customers who are concerned about issues like climate change.
‘On top of this manufacturers value the UK car industry’s labour flexibility – a notable difference compared to somewhere like Germany.’