Capacity constraints will inevitably slow Jaguar Land Rover’s rise this year, according to a senior analyst.
Alan Greene, vice president at Moody’s, said the car giant would be hampered by manufacturing constraints, despite surging demand for its cars in the Americas and Far East.
Gaydon-based Jaguar Land Rover (JLR) unveiled a record-breaking monthly sales performance in April, seeing total sales soar by 30 per cent, to 37,171 vehicles.
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However, Mr Greene, a senior credit officer at Moody’s and lead analyst for JLR’s Indian parent group Tata Motors said there were signs that the growth could not continue despite major investment plans in the 海角视频, China and the Middle East.
He said: “The current year is critical for the group with both JLR and the Indian businesses facing challenges.
“JLR will see slower sales growth, primarily due to capacity constraints, although it is likely to retain its strong liquidity profile even as it ramps up investment in new products and starts overseas manufacturing operations.
“By contrast, Tata in India must find a way to recover lost market share in its commercial vehicle business and to develop its range of cars to compete with those produced by the global industry titans.”
JLR’s joint venture with Chery Automobile to build cars in China is potentially months away, but the annual capacity of 130,000 vehicles will take time to build up to.
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Moody’s says that in order to meet JLR’s future model roll outs plans, the firm will have to increase investment in additional manufacturing capacity from £2.7 billion this year to up to £3.7 billion in 2015.
The rise of Jaguar Land Rover’s financial performance has been incredible – its most recent annual profit, in 2013, was
£1.67 billion after selling 22 per cent more vehicles.
And that showed no signs of abating with quarterly profits of £842 million announced earlier this year, with retail volumes up 27 per cent year-on-year to 112,172 vehicles.
However, rolling three monthly retail sales growth for JLR slowed to eight per cent year-on-year in the last quarter of 2014, but recovered to 12.7 per cent in the first quarter this year.
In recent months the firm confirmed plans to build a car plant in Brazil capable of producing 24,000 vehicles a year.
Late last year JLR said that it would invest £240 million in the factory, which would begin production in 2016.
Months later the Post reported that talks were taking place to set up a new plant in Saudi Arabia.
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Moody’s expectation is for JLR to increase unit sales in 2015 by a “low single digit” percentage, due to its available capacity.
Its success will keep Tata in the black, according to Moody’s, with the Mumbai-based outfit struggling due to the Indian economy. Moody’s said in a statement, confirming its rating of Tata’s credit as stable: “The stable outlook reflects JLR’s relative strength which continues to buy time for the core Indian business to recover and, despite the negative free cash flow overall, continues to support group credit metrics at an appropriate level.
“However, financial year 2015 is a critical year as JLR’s sales growth rate slows and execution risk rises both in terms of increased product development expenditure and the starting up of overseas manufacturing operations.
“At the same time, Tata’s Indian operations need to regain some of their lost market share, with success of new launches key to the passenger car business’s long-term prospects.”