India Watch : Cash crunch won’t affect JLR’s R&D
Swaraj Baggonkar in Mumbai, Business Standard, 4th July, 2009
Jaguar and Land Rover (JLR), the two British marques reeling under financial stress, will be able to keep their research and development (R&D) programme largely on schedule for the time being, thanks to timely support from its parent company Tata Motors.
Both Jaguar and Land Rover have huge funding requirements, which are essential for updating technology, while providing necessary support to future product development. Stricter emission norms, which are expected to come into force in 2012, will also pose a challenge.
Tata Motors has so far injected over £800 million (nearly Rs 6,300 crore) as direct financial aid into the two brands for meeting working capital requirements and also to fund R&D processes. Prior to the JLR acquisition, the annual bill on R&D for both the brands stood at £400 million (about Rs 3,200 crore). This is about five times the annual R&D expenditure of Rs 550-600 crore at Tata Motors.
David Smith, Chief Executive, Jaguar and Land Rover, said: “The £340-million (about Rs 2,700-crore) loan from the European Investment Bank (EIB) is for the long term, to be spread over the next 18 months. Our R&D expenditure, including the LRX Concept, will not be stuck because of the loan.”
Tata Motors has got an approval from the EIB for a loan of £340 million, but a mandatory guarantee from the UK Government or any private bank is pending. This amount will be used to support JLR’s development of sustainable technologies.
“JLR is currently in the middle of an £800-million (nearly Rs 6,300-crore) investment programme to develop new environmental technologies, which is ongoing,” replied Don Hume, Director Corporate and Government Affairs, Jaguar Land Rover to a Business Standard questionnaire. “Jaguar Land Rover is also working with suppliers, government agencies and universities on a range of future technologies, including hybrid electric vehicles, flywheel energy capture, range extended plug-in hybrid electric vehicles and recycled aluminium,” he further added.
JLR is currently in the middle of an £800-million (nearly Rs 6,300-crore) investment programme to develop new environmental technologies, which is ongoing. Jaguar Land Rover is also working with suppliers, government agencies and universities on a range of future technologies, including hybrid electric vehicles, flywheel energy capture, range extended plug-in hybrid electric vehicles and recycled aluminium.” Don Hume, Director Corporate and Government Affairs, Jaguar Land Rover
Expectedly, the gap between the cost of developing a model for Jaguar or Land Rover and a Tata Motors model is huge. To better illustrate this, consider the fact that the expenditure involved for developing a single model of Land Rover was almost twice the amount that was required by Tata Motors to develop the Indica Vista. In fact, Land Rover is pumping in about £400 million (around Rs 3,200 crore) for developing an all-new model on the LRX Concept platform, whereas Tata Motors incurred an investment of about Rs 1,700 crore on developing the Indica Vista.
The LRX Concept, a cross-over between a coupe and a sports utility vehicle, was first showcased at last years’ Detroit Motor Show and will subsequently go into production in due course of time. Apart from the LRX, the development of a military vehicle from Land Rover and a hybrid Jaguar is also underway.
The UK Government has already granted £27 million (about Rs 200 crore) to Land Rover for the production of the all-new LRX, which will also be the smallest, lightest and most fuel-efficient Land Rover yet. The model also aims to meet the stricter emission norms. The new emission norms, which are set to kick in by 2012 across the European Union, require new cars to pull down CO2 emissions by 19 per cent. The European Commission wants to reduce the emission from around 160gms per km to 130gms per km by 2012.
“The LRX Concept demonstrates our intent to reduce tailpipe emissions with a forecast capability of achieving 120gms per km and 60 miles per gallon (100km/4.7litres, or about 21 km a litre of diesel) with a hybrid diesel powertrain. Land Rover has cut levels with each successive model and is developing technologies, including hybrids and lightweight material, to make further improvements,” stated the reply from JLR.
[Source: Business Standard]