There is much more production capacity than production in the world, and this is especially true in the automotive sector, where excess capacity is estimated at 30%. The consequence? Low profits, given the sub-optimal utilization of the plants and strong drive towards concentration to lower fixed costs.
But there are exceptions and one of these is JLR – Jaguar Land Rover – which since 2008 has been part of the Indian Tata Motors empire, which bought it from Ford for 2,3 billion dollars. The first two years were difficult, but for fiscal years (ending 31 March) 2011 and 2012 the results were spectacular: in 2010 the ratio between earnings (of £1,1 billion, $1,7 billion) turnover was 11%, and last year JLR did even better, with profits of £1,5bn. Over the past two years, Tata has gotten more out of JLR's earnings than the acquisition cost. The success was due to strong sales in China of the high-brand cars (JLR also includes the Daimler marque and produces in three UK factories, plus one under construction) and the warm reception to the new Land Rover Evoque. Here's a Western manufacturer who doesn't complain about China…
