LONDON — Jaguar Land Rover loses more than 100,000 sales annually due to customer perception of quality issues with its models, CEO Thierry Bollore said.
JLR has long struggled to have the same quality standards as its rivals, but the company has made “dramatic improvements” on reliability recently, Bollore told investors on a call on Friday.
“The dissatisfaction of our customers was really detrimental to our natural volume. The missed opportunities today are massive,” he said. “It’s more than 100,000 healthy sales that we could perform.”
Land Rover came second to last in the most recent JD Power survey in the U.S., which questioned owners of three-year-old models. Jaguar was third from bottom.
Bollore told investors that he made quality improvements a key part of his plans to relaunch the premium automaker. The former Renault CEO took over as JLR’s boss in September,
He said recorded dissatisfaction issues were now at a “record low” with 2021 model year cars.
Future problems will be reduced because the cars will be simpler, JLR head of design Gerry McGovern told investors on the same call.
“We are reducing the complexity of our vehicles massively. The result will be that fewer things going wrong because the process will not be as complex,” he said.
David Bailey, professor of business economics at the Birmingham Business School in central England, said Jaguar Land Rover’s quality issues “go back to Ford ownership and before that even.”
JLR’s current owners, Tata Motors, bought the company from Ford in 2008.
“It’s been a significant issue in China, with customer protests back in 2018 outside of JLR’s Chinese head office in Shanghai,” Bailey said.
Quality issues cost not just future sales but can also trigger discounting of current models and increase warranty costs, Bailey said.
JLR’s warranty costs have been reducing recently as quality levels improve, Adrian Mardell, JLR’s finance chief, told investors when announcing the automaker’s latest quarterly results on Jan. 29.
In the nine months to the end of December, warranty costs nearly halved to 489 million pounds ($680 million) from 812 million in the same period the year before.
“The 2020 model year will be the best model year for at least three years for us,” Mardell said.
JLR is chasing a target for warranty costs of below four percent of gross revenue, he said.
In last year’s JD Power Initial Quality Study, which looks at problems faced by owners during the first 90 days of ownership, the Jaguar E-Pace, built by Magna Steyr in Austria, topped its SUV category beating the Lexus UX. Jaguar finished sixth from the bottom, ahead of Mercedes-Benz, Volvo and Audi. Land Rover was second last ahead of Tesla.
An extra 100,000 sales would make a big difference to JLR as it chases a more high-end, higher-profit market. JLR’s global vehicle sales fell 24 percent to 425,974 last year, it said on Jan. 11. Of those sales, 323,480 were Land Rovers, down 18 percent, and 102,494 were Jaguar models, down 37 percent.
Jaguar will phase out its current range of internal-combustion engine vehicles to switch to new, electric-only cars from 2025 and target more affluent customers. Land Rover meanwhile will also push more upmarket, Bollore said.