From the BBC:
Sales of Jaguar Land Rover cars have fallen sharply, taking the firm into a loss for the three months to the end of September.
The firm blamed lower sales in China for the decline, as well as uncertainty in Europe over diesel and Brexit. Jaguar made a pre-tax loss of £90m for the quarter, compared to a profit for the same period a year ago.
Car makers have high fixed costs and fairly low marginal costs, so they have to make up their minds which strategy to adopt:
a) Be a mass manufacturer. You make as many cars as possible to reduce fixed costs per car, enabling you to stay price competitive. They even out good and not-so-good years by tweaking their finance deals so that they can shift the same number of new cars each year. In the really bad years, the shit hits the fan... but they are big enough to be able to haggle for government bail outs.
b) Be a niche/luxury car maker. Do like Morgan, and deliberately only make half as many cars as you could sell. That enables you to either charge higher prices in high demand years; or charge lower prices and have the luxury of a waiting list, taking non-refundable deposits for a place on the waiting list to smooth cash flows.
If you're only making half as many cars as you could sell in normal years and demand falls by half in bad years, so what? You can still sell every unit you actually make. Dribbling them onto the market is also good for second resale values, which in turn feeds demand for new cars in a virtuous circle.
Jaguar-Land Rover has messed up, it's a niche/luxury car maker behaving like a mass manufacturer.
Debate Magazine
