Join Date: Feb 2001
Location: The Hills of North Georgia,USA
Jaguar hits brakes on X-Type output; entry-luxury market pitfalls cited
By MARK RECHTIN | Automotive News
LOS ANGELES - Admitting that it's still on a steep learning curve when it comes to selling entry-level luxury cars, Jaguar Cars Ltd. will halt production of the X-Type for two weeks at the end of February to balance inventories and lagging sales.
The suspension, which Jaguar said will take about 2,500 units out of production, follows a 12.5-day output reduction in the fourth quarter. According to the Automotive News Data Center, X-Type production slowed from 7,801 units in September to 4,814 in December.
Jaguar blames the stoppages on global economic uncertainty. But company officials also acknowledged last week that the automaker has learned painful lessons from its move into the entry-luxury market.
The V-6 sedan, Jaguar's lowest-priced model, is priced from $30,595, including a $645 destination charge, to $39,095.
"We're taking measures to make sure the X-Type does not get into an oversupply situation," said Jaguar spokesman Simon Sproule. "BMW, Audi, Mercedes and Lexus are being very aggressive with their leasing. It's a competitive market, so it behooves us to make sure we don't oversupply our dealers."
Globally, Jaguar sold about 73,600 X-Types in 2002, its first full year on sale in all markets. However, sales in the main markets of Europe and America slowed in the last six months of 2002 to just 27,609, according to the Automotive News Data Center.
When the car was launched, Jaguar had set its hopes on selling 100,000 units annually.
In the United States, Jaguar sold 33,018 X-Types in 2002, which Sproule said "exceeded expectations." But the sales rate has been erratic, driven mostly by advertising and incentives.
In August and December, when the car was backed by retail-theme ads in America, sales were strong. But in October and November, without support, sales slumped.
Sproule admitted that Jaguar has had a sharp learning curve in the different dynamics of the entry-luxury market, compared with the higher strata of consumers who have purchased the XJ, XK and S-Type luxury vehicles in the past. *
Up to 70 percent of X-Type sales have been driven by subsidized lease deals, according to Richard Beattie, executive vice president of sales and marketing for Jaguar and Land Rover North America.
According to CNW Marketing/Research of Bandon, Ore., the average X-Type transaction price was $1,762 below sticker between January 2002 and July 2002. But that gap widened to $3,413 in the second half, said CNW President Art Spinella.
The number reflects both the negotiating skill of the customer and incentives, Spinella said.
Late last year, in an attempt to get off the incentive juice, Jaguar's U.S. executives decided to let demand find its own level.
"That move away from leasing did have an effect on our sales." Sproule said. "But the result is better for our long-term business. You can't sustain such artificially high numbers. We want to get back more toward people purchasing outright or financing."
He declined to give a sales target for 2003.
Rather than push cars with incentives, Jaguar has decided to spend more money on product-specific advertising. It debuted an ad campaign in January that shows the all-wheel-drive X-Type literally clawing its way down a rainy road.
In Europe, the X-Type's September spike was because of an industrywide sales surge in England. But otherwise, European sales have lagged, falling to 2,000 units or less in four of the past six months.
The X-Type has been hurt in Europe by the lack of a diesel-engine option, as well as being available only as a sedan. The introduction last spring of a lower priced 2.0-liter V-6 businessman's fleet special sparked demand, but only for a short time.
Mark Fulthorpe, an analyst with CSM Forecasting in Byfleet, England, projected that Jaguar may be looking to build as few as 60,000 units at the X-Type plant in Halewood, England, this year. That would make profitable operation of the plant doubtful since its capacity is 125,000 units.
Given the investment Jaguar made in updating Halewood from a creaking Ford assembly line, Fulthorpe wonders whether the plant could be profitable even at 80,000 units of production.
"It looks as though Jaguar has overestimated demand, and I'm not sure if there will be enough residual demand when the diesel and wagon versions finally arrive," he said.
The X-Type accounted for 54.0 percent of Jaguar's total U.S. sales last year, but inventory levels have risen even as production has slowed.
The automaker sold about 4,200 total units in America monthly in September, October and November, but inventories reached 16,400 units on Dec. 1, a 101-day supply, according to the Automotive News Data Center.
Although the December promotional event helped ease the glut, Jaguar still had 13,700 units, or a 73-day supply, in its U.S. inventory on Jan. 1. A 60-day supply is considered optimum by the industry.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....