A special edition of the Range Rover Evoque was designed in collaboration with Victoria Beckham. Photograph: Dave M. Benett/Getty Images
Jaguar Land Rover has won gold for British exporters by reporting a 45% boom in second-quarter profits to well over £500m, driven by soaring demand from China for the new Range Rover Evoque.
The Coventry-based company, now under the control of Tata Motors of India, saw a 91% increase in overall sales from the luxury-car-hungry Chinese market year on year.
More than 80% of the vehicles produced at three UK plants are being shipped abroad, increasingly to countries such as China, Brazil and Russia.
"China is strong, especially strong for the luxury market," said Ralf Speth, the chief executive of JLR. "We have a very low market share in China … therefore we are sure we can continue this growth."
Industry experts say the Range Rover Evoque has been particularly cleverly marketed – boosted by a special edition designed in collaboration with Victoria Beckham – but they believe the whole company is thriving on heavy investment, strong product lines and good management.
The strong financial performance was announced on the day the Office for National Statistics revealed that in June Britain's trade deficit had ballooned to its highest level since modern records began following a sharp drop in exports.Against this backdrop, JLR sales rose 34% to 83,452 vehicles, including nearly 72,000 Land Rovers – but fewer than 12,000 Jaguar saloon cars – in the three months to 30 June.
Revenues for the quarter hit £3.6bn, an increase of 35%, while operating margins stood at 14.5% and an operating profit of £527m in the quarter – an increase of 45.6% – was recorded.
"Continued strong revenue and operating profit performance were supported by demand for new products, improved market mix and a favourable exchange rate environment," said the company.
JLR has declared a first dividend of £150m, which went to Tata Motors, whose wider business was hit by a slowdown in its home market of India and a depreciation of the rupee. The wider group reported a consolidated profit, before tax, up 34% but net income rose only 12%.
Tata bought Jaguar Land Rover from the Ford Motor Company in 2008 for about £1.5bn and its subsequent success after a long period of difficulty means 23,000 staff are employed in Britain. About 8,000 have been taken on in the past 24 months alone and the business has recently announced plans to build a new engine plant in south Staffordshire that could take on a further 750 workers. JLR has also decided to build a new Jaguar F-type at the Castle Bromwich facility in Birmingham.
Professor Baback Yazdani, the dean of Nottingham Business School and a car industry expert, said JLR had "bounced back remarkably" over recent years by positioning itself for overseas market growth in luxury brands.
"This is about foreign ownership but local management. Just like the Olympics, if you want to be a champion you have to put in relentless hard work as well as inspired leadership.
"Tata has put in long-term investment but given the responsibility to JLR to deliver its own destiny."
JLR is just one of a number of automobile success stories in Britain with Toyota, Nissan and the BMW-owned Mini business also performing strongly at a time when car sales in Europe and the US are static.
Toyota said late last year that up to £100m would be invested and 1,500 jobs created with the production of a new hatchback model at the group's Burnaston plant in Derbyshire. This month the Japanese company announced that first-quarter profits had almost quadrupled, although this was exaggerated by difficulties last year owing to the tsunami which forced it to halt production.
Meanwhile, those more exposed to volume car markets in the US and Europe such as General Motors of Detroit, which also controls the Vauxhall brand, saw a fall in quarterly profits in the three months to June. In 2009 the company filed for chapter 11 bankruptcy and received a $50bn bailout from the American government.
VW weathers crisis while subsidiary Seat amasses losses
As it strives to become the world's most profitable automotive group, the last thing Volkswagen needs is a perpetually loss-making subsidiary. Seat, its Spanish car division, is exactly that, which is why VW has ambitious plans for the carmaker outside western Europe.Unlike its competitors, VW has weathered Europe's debt crisis, reporting higher profits and record deliveries while adding production capacity in expanding Chinese and Russian markets. Seat, meanwhile, has amassed ¤1bn (£786m) of losses since 2008 and has made a profit in only one of the last 10 years, a dismal performance that VW seems committed to fix.
Battered by the slump in austerity-hit Spain, Seat is the only brand among VW's five main car nameplates to be stuck in the red, VW's recent quarterly results showed. "Seat is the undisputed black sheep in the VW family," said Ferdinand Dudenhöffer, director of the Centre for Automotive Research at the University of Duisburg-Essen. "It would be economically more sensible to close it down and use its facilities for other group brands."
VW wants Seat to become less reliant on Spain and instead seize potential in China and Russia.
The brand plans to open 15 showrooms in major Chinese cities including Chengdu, Nanjing and Shenzen by the end of the year, exploiting growing demand from young buyers for sporty compacts. The average Seat buyer is 34, giving it the youngest customer profile in the VW group.
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