Jaguar Land Rover asking for a loan....Pause on EV development

[Bobby Dazzler]

If one or two 'big players' were filing for Chapter 11 it might sound OK, but just look at the list. What Hertz do for a living is pretty much doomed if we use the model that cars are (in the main) hired out to business and holiday travellers, by the time that market is back to normal - probably never - bankruptcy looks likely unless they can diversify, diversify into what ?

I hope they can all 'restructure' and save tens of thousands of jobs world wide. But it's not looking good.

In the short term, survival will be challenging for hire car companies, but in the long term their future is much brighter, as their business model is likely to be more popular in the future than it is today.

The future of the car according to many car manufacturers is “mobility“, one of those terms which could mean many things but in essence means a move away from car ownership and towards personal and seamless transport, using shared vehicles and integrated transport.

What does that really mean? For some, including those outside of large towns and cities, it might mean owning a small electric or hydrogen powered vehicle which is used for the vast majority of short distance journeys, but which would be used for part of longer journeys but not all the way to the destination, switching to other forms of transport for very long distances or upon reaching urban areas. Or rather than owning a car, even leasing a car, maybe renting or even subscribing to use a variety of shared vehicles which might be more appropriate for whole or part journeys, eg larger vehicles or even an electric bike.

For those who live in large towns and cities then they may not even own (or rent) a car of their own. It may be that they use shared cars as part of some kind of subscription or pay per use scheme, or use driverless autonomous shared cars (ie a taxi without a driver) to get to their connection with to the next leg of their journey.

In many ways it’s not really any different to what we have been building over the last century, a network of different transport options to suit the journey and personal situation. The only thing that’s really changing is the mindset shift from owning a car and driving it from the start to the end of a journey, to using personal vehicle as part of an integrated transport system.

A hire car business, is really a shared car business. If I was Hertz I would be setting up a subscription type service before the car manufacturers do. Even if it doesn’t take off for a while, the cars can be used for traditional hires, the overheads for operating their subscription model would be modest compared to the cost of running their hire car business.

 

[Darrell]

Should they get a bail out? If they don't, it's not just then who will go under, they could take a lot of their suppliers down with them.

Is a bail out like a loan?

Looking at it from a different point of view, a lot of my friends are ditching there cars because they are too expensive, there is nowhere to park them and there are many other methods of decent transport to use. But they then end up subsidising the car manufacturers through their taxes because the manufacturers are making something that nobody wants!

 

[Bobby Dazzler]

In the short term, survival will be challenging for hire car companies, but in the long term their future is much brighter, as their business model is likely to be more popular in the future than it is today.

The future of the car according to many car manufacturers is “mobility“, one of those terms which could mean many things but in essence means a move away from car ownership and towards personal and seamless transport, using shared vehicles and integrated transport.

What does that really mean? For some, including those outside of large towns and cities, it might mean owning a small electric or hydrogen powered vehicle which is used for the vast majority of short distance journeys, but which would be used for part of longer journeys but not all the way to the destination, switching to other forms of transport for very long distances or upon reaching urban areas. Or rather than owning a car, even leasing a car, maybe renting or even subscribing to use a variety of shared vehicles which might be more appropriate for whole or part journeys, eg larger vehicles or even an electric bike.

For those who live in large towns and cities then they may not even own (or rent) a car of their own. It may be that they use shared cars as part of some kind of subscription or pay per use scheme, or use driverless autonomous shared cars (ie a taxi without a driver) to get to their connection with to the next leg of their journey.

In many ways it’s not really any different to what we have been building over the last century, a network of different transport options to suit the journey and personal situation. The only thing that’s really changing is the mindset shift from owning a car and driving it from the start to the end of a journey, to using personal vehicle as part of an integrated transport system.

A hire car business, is really a shared car business. If I was Hertz I would be setting up a subscription type service before the car manufacturers do. Even if it doesn’t take off for a while, the cars can be used for traditional hires, the overheads for operating their subscription model would be modest compared to the cost of running their hire car business.

Breaking the third rule of MBClub: Quotjng oneself.

I have two colleagues who live in Amsterdam. The first has lived in major/capital cities for many many years and hasn’t owned a car for decades. She uses taxis/Uber and public transport to get around the city, and to the airport. She has no need for a car and on the rare occasion that she needs one then she’ll rent it.

The second moved from rural Scotland to Amsterdam a few years ago and gave up his own Discovery and 911 in favour of a leased Passat estate because he can’t really use or enjoy a car regularly and garage space is expensive so utilitarian “do anything” car is all he needs. He also travels around the city and to the airport by taxi/Uber and public transport. He hardly ever uses the car, but it’s there if he needs it. The reality is that they both travel in the same way the vast majority of the time, even in the amount of time that they actually drive a car - the only difference is one rents it specifically for the period they use it, the other leases a car for that they keep for those rare occasions. The difference is mindset.

 

[Petrol Pete]

It reads like they are asking for a loan...whether it ever gets re paid is another thing, thats even if it is granted. looking at it in stark black and white and simplifying it right down you would be mad to loan them anything, but it gets far more complicated when keeping people in jobs , not making cars becomes the priority.

 

[alabbasi]

Is a bail out like a loan?

A bail out is a bail out. Whatever the terms are (loan or giveaway) will be worked out. In the case of GM during the financial crisis, it was a loan and the government was repaid with interest. I'd be interested in seeing how it works out. Britain may get it's own car industry again and if it does. Jaguar and Land Rover will not be the worse ones to have.

 

[Darrell]

A bail out is a bail out. Whatever the terms are (loan or giveaway) will be worked out. In the case of GM during the financial crisis, it was a loan and the government was repaid with interest. I'd be interested in seeing how it works out. Britain may get it's own car industry again and if it does. Jaguar and Land Rover will not be the worse ones to have.

I’m not really comfortable with lending money to a company to build things that are not really wanted.

 

[Bobby Dazzler]

I don’t really understand your last comment but as I see it this is what seems to be happening here.

My post which you quoted was in response to addbuyer trying to buy a car from a main dealer salesperson who was dragging their feet.

 

[alabbasi]

I’m not really comfortable with lending money to a company to build things that are not really wanted.

It's a paradox , would you rather pay unemployment to all the people who work their and all the employees of their suppliers?

As far as what people want? Land Rover is the jewel in the crown of the British motor industry. Historically, it's the only brand that made money.

 

[Darrell]

My post which you quoted was in response to addbuyer trying to buy a car from a main dealer salesperson who was dragging their feet.

Ok thanks. What’s addbuyer??

 

[Darrell]

It's a paradox , would you rather pay unemployment to all the people who work their and all the employees of their suppliers?

As far as what people want? Land Rover is the jewel in the crown of the British motor industry. Historically, it's the only brand that made money.

They will find other work.

Land Rover is the jewel in the crown of the British motor industry!! Really? Then were doomed I say. Doomed. If it was that good why did BMW sell it. And why did Ford sell it?

 

[Bobby Dazzler]

Ok thanks. What’s addbuyer??

I am in the throws of trying to buy an ex-demo but anyone would think the stealer doesn’t want my money. They are dragging their heels like I’ve never experienced before. I’m not bothered as I haven’t even managed to sit in the car let aloan test driven it. They took a 1k deposit, well card details, the money hasn’t left my account so the car is reserved for me. Desperate for sales doesn’t ring true in my experience

 

[Petrol Pete]

The model of people renting a car as and when they need it has a major flaw...you need a driving licence and (for the moment) a credit card. The credit card thing is easily bypassed but the lack of driving license less so.

We are all 'into' cars (a bit) because we have seen fit to join a forum so most, if not all of us have a driving license. I am surprised at the amount of young (mainly) men who I meet who have no intention of getting a driving license because 'it's too much hassle owning a car' . I agree it might be too much hassle owning a car for their current lifestyle ,but hiring one from time to time will be impossible without a driving licence.

 

[alabbasi]

Land Rover is the jewel in the crown of the British motor industry!! Really?

Yep, it's even Indian

 

[Bobby Dazzler]

The model of people renting a car as and when they need it has a major flaw...you need a driving licence and (for the moment) a credit card. The credit card thing is easily bypassed but the lack of driving license less so.

We are all 'into' cars (a bit) because we have seen fit to join a forum so most, if not all of us have a driving license. I am surprised at the amount of young (mainly) men who I meet who have no intention of getting a driving license because 'it's too much hassle owning a car' . I agree it might be too much hassle owning a car for their current lifestyle ,but hiring one from time to time will be impossible without a driving licence.

But that’s an important distinction, fully autonomous cars (in the long term) will not require a driver, and hence a driving licence.

 

[Petrol Pete]

But that’s an important distinction, fully autonomous cars (in the long term) will not require a driver, and hence a driving licence.

looooong way in the future, just like the flying cars we were all promised by the year 2000...1970's ?

 

[Petrol Pete]

Yep, it's even Indian

Isn't The Jewel in the Crown on the high street in Romford, next door to the launderette ?

 

[Dippo]

I’m not really comfortable with lending money to a company to build things that are not really wanted.

Aren't you working on HS2?

 

[Petrol Pete]

Aren't you working on HS2?

What's the old joke ? ....Q : 'How many people are working on HS2 ? A: 'About half of them !'

 

[MJJ]

I’m not really comfortable with lending money to a company to build things that are not really wanted.

Outside of the US where the culture expects to buy a car, and drive it away that day, JLR do not build many cars at all for 'stock'. Walk into a JLR dealer wanting a new car, and you are most likely to have to wait 6 months for your car to be built to order. Some dealers will take a punt and order some cars for demo, or the chance of a quick sale, but it is fairly unusual.

However, for all of the car manufacturers, the same core challenge remains. Running a factory to build cars is monumentally expensive. It is not a significant amount cheaper to run it at (for example) 50% capacity as the fixed cost element (including employees) is so large. This means that if you run at a reduced build rate, the cars you build are not profitable to the business. Thus, running at closer to normal capacity makes sense *if* you can store cars temporarily, and *if* you believe the market demand is going to be there in future.

Additionally, let's imagine a car manufacturer has built 10,000 cars in February against customer orders placed 6 months ago. As we are all in restrictions, they cannot deliver those cars to the customer and thus cannot be paid for them. That is likely £300 million of stock that is not paid for, and thus not cash flow for the company.

Loaning a vast manufacturing business (with an even larger component supplier base, who also cannot run profitably at substantially reduced volume) money to aid cash flow whilst we weather the enforced dip in demand means that business still exists in 12 months time when the world is returning to normal.

Personally, as a fairly sensible family man who has long prioritised having savings over all the toys, I do find it morally difficult justifying propping up businesses that are so lean that they cannot survive 3-6 months of crisis. However, we consumers want everything as cheaply as possible so that buffer often gets sacrificed.

Martin.

 

[Darrell]

Aren't you working on HS2?

No.
But if you think HS2 is just about getting into Birmingham 20 mins quicker than before then you need to look into a bit more.