Jaguar Land Rover suffers £3.6bn annual loss as key Chinese market splutters to a halt

The Indian-owned British automotive giant Jaguar-Land Rover (JLR) has posted a £3.6bn annual loss as the faltering Chinese car market weakened significantly.

The annual figures were heavily-impacted by a £3.1bn write down in the third quarter, to cover falling demand for newer models, as well as for diesel-powered cars.

The figures

The car manufacturer, which has already announced thousands of job cuts in the UK in the first months of 2019, made the loss after a £400m profit in 2018.

JLR did, however, manage a slight turnaround in the final quarter of the financial year which ended 31 March, posting pre-tax profit of £120m after nine months of losses.

Without the £3.1bn charge, the firm’s annual losses would have come to £358m.

Continued weakness in the Chinese car market led to a 5.8 per cent decline in year-on-year retail sales to 578,915 vehicles.

Revenues were £7.1bn, down £421m year-on-year, while operating cash flow was £1.4m.

Why it’s interesting

China’s recent economic slowdown – caused in part by its trade war with the US – has hit JLR hard, and was cited as one of the main reasons for the announcement of 4,800 job losses earlier this year. Most of these are due in the UK, where the company has 40,000 workers.

But on a quarterly basis JLR's ability to turn a profit will likely cheer investors, many of whom will have been expecting a fourth-straight loss for this financial year. The firm launched a £2.5bn turnaround plan earlier this year, to which it gave much of the credit for the gains.

Nevertheless, the yearly loss is more bad news for British car manufacturing, which has suffered a number of crushing blows in recent months, with Japanese giants Nissan and Honda both announcing plans to abandon the UK in February. Meanwhile, US giant Ford is expected to cut as many as 550 jobs from its UK operations in the coming weeks.

JLR is the main source of revenue for Indian owner Tata Motors.

What JLR said

Chief executive Ralf Speth said: “Jaguar Land Rover has been one of the first companies in its sector to address the multiple headwinds simultaneously sweeping the automotive industry.

"We are taking concerted action to reduce complexity and to transform our business through cost and cash flow improvements. The company has returned to profitability in the fourth quarter and already delivered £1.25 billion of efficiencies and savings.

“Jaguar Land Rover is focused on the future as we overcome the structural and cyclical issues that impacted our results in the past financial year. We will go forward as a transformed company that is leaner and fitter, building on the sustained investment of recent years in new products and the autonomous, connected, electric and shared technologies that will drive future demand.”