Greetings, here is Speed Lines, where we cover the latest in the realm of transportation. As it’s Friday, that’s a reason to celebrate. However, the situation at hand offers little to cheer about. Nonetheless, together we shall overcome these challenges.
An Unfavorable Situation for JLR
At present, Jaguar Land Rover is grappling with a multitude of challenges surpassing those faced by many other automakers. The uncertainties surrounding Brexit, declining U.S. and China sales, and a diminishing demand for diesel vehicles in Europe are among the significant issues plaguing the company. Despite signs of recovery since the end of last year, the label of “financially troubled” still seems fitting for the automaker.
In light of the current circumstances, the impact of the coronavirus outbreak could not have come at a worse time for JLR. Parent company Tata, based in India, has alerted investors about the potential decrease in profits for 2020 as the company grapples with closures of plants and deserted dealerships in China. As Reuters emphasizes:
“Given the highly uncertain nature of the current situation, the downturn in Chinese sales due to the coronavirus is estimated to lower Jaguar Land Rover’s annual EBIT margin by approximately 1%,” the statement read.
Additionally, as a pivotal epicenter for vehicle components manufacturing, any extended closure of plants in China has disrupted automotive supply chains worldwide, impacting manufacturers on a global scale.
According to Tata, JLR has mitigated potential shortages of components by collaborating closely with suppliers and resorting to increased air freight services.
To maintain production, JLR has taken to transporting Chinese components in luggage to the UK. In January, Tata Motors cautioned that the coronavirus could affect the estimated profit margin of approximately 3% for the JLR division for the fiscal year 2020, particularly at a juncture when efforts were underway to revitalize sales in China.
Reports regarding this unconventional approach have been circulating since late February, when the outbreak commenced. One must acknowledge their resourcefulness, at the very least.
Significant Decline in Oil Consumption
Another noticeable trend is the substantial reduction in petroleum usage and demand in China, attributed to people staying indoors and travel restrictions. Consequently, this shift has resulted in an improvement in the nation’s formerly poor air quality.
As Gizmodo further elaborates:
IHS Markit, a financial data group based in London that hosts a prominent energy conference annually (subsequently canceled due to the outbreak), released a research alert on the impact of the coronavirus on the oil market in the first quarter of 2020. The findings reflect a significant global shift. COVID-19, the official term for the virus, has paralyzed the Chinese economy. As the largest importer of oil and gas globally, this substantial slowdown has triggered a downturn in the fossil fuel industry, a trend which may exacerbate as other nations grapple with containment measures.
[…] The worldwide oil demand in the first quarter of 2020 is anticipated to plummet by 3.8 million barrels per day compared to the previous year, marking the most substantial quarterly decline on record. This reduction isn’t solely attributable to China’s economic slowdown. The ramifications of the virus are also affecting regions in Europe, Japan, South Korea, the Middle East, and North America.
According to Jim Burkhard, the chief of oil market research at IHS Markit, we witnessed a similar situation during the peak of the 2008 crisis. This time, however, it was more immediate due to China rapidly shutting down significant sectors of its economy almost overnight, resulting in what is being labeled as an abrupt drop in demand.
Should this trend persist, and it appears to be just the beginning, questions arise about the potential emergence of a recession triggered by the coronavirus.
GM’s Android Strategy Compared to Tesla’s Apple
A recent update from Bloomberg discusses General Motors’ significant battery announcement this week. The article highlights an intriguing perspective on the automaker’s strategy: by concentrating on scalability and diversity, GM aims to position itself as the Android-like mass-market alternative to the more luxurious Tesla.
For GM or any other automaker aspiring to challenge Tesla in the electric vehicle race, the battery is of utmost importance. Its price point could render the vehicle inaccessible to many customers and jeopardize its profitability even before it hits the showroom floor. If GM achieves success with this battery advancement and persuades consumers to follow suit, the Detroit automaker might finally possess what major car manufacturers have been seeking for years—a viable alternative to Tesla’s dominance, akin to Android challenging the iPhone’s supremacy.
Certainly worth delving into further.
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Your Input
Can GM position itself as the Android to Tesla’s Apple? With its existing manufacturing capacity, GM has the potential to achieve this, a feat that Tesla is still striving to accomplish.