LONDON — Jaguar Land Rover will resume marketing spending after production levels for key models started to return to normal.
The automaker had reduced its marketing spending in recent months as it struggled to fulfil orders for in-demand models such the new Range Rover, Range Rover Sport and Land Rover Defender due to chip shortages and a slow ramp-up of production of the new Range Rover models.
“We really have not marketed these cars or any of our vehicles over the last 12 months because of supply,” Chief Financial Officer Adrian Mardell told investors on JLR’s quarterly earnings call on Wednesday.
JLR had 205,000 unfulfilled orders in the July-Sept. quarter, similar to the amount it had the previous quarter. Of those 72 percent were for the Range Rover, Range Rover Sport and Defender, the company said.
While production is increasing as supply problems ease, orders in the last quarter were 92,000, below JLR’s original target of more than 100,000.
“We are more certain of supply from January,” Mardell said. “With supply starting to improve we are also anticipating other investments like fixed marketing to generate more orders, which we are deliberately not generating today.”
JLR’s variable marketing expenses, which included discounts, hit a record low in the last quarter at 1.1 percent of revenue, down from 1.7 percent the previous quarter, JLR figures show. The drop saved the company 29 million pounds ($34 million), according to its figures.
The biggest drop came in its fourth calendar last year, when variable marketing expenses dropped from 5 percent to 1.6 percent, saving the company 139 million pounds. In the last three months of 2019, JLR’s variable marketing expenditure was 7.5 percent of revenue, company figures show.
The auto industry across the board has been able to save money on all aspects of sales promotion as the squeeze on parts, including semiconductors, cut production and drove up order times. The lack of availability meant there was no need to push cars, either with discounts or through advertising, helping automakers to save significant sums.
JLR has been squeezed more than most on chips especially, leading it to negotiate directly with chipmakers to secure long-term supply. One chip supplier broke its contract with the automaker in September, which “impacted dramatically” production in the month, Mardell said. Relations with the chipmaker have since been re-established, the company said.
JLR is focusing its attention on increasing production of its most profitable Range Rover and Range Rover Sport models, and increased Range Rover retail sales helped to grow revenue to 5.3 billion pounds in the last quarter, up 36 percent versus the same quarter the previous year.
The automaker posted a reduced loss of 173 million pounds from 302 million pounds in the same quarter last year.
The Range Rover was JLR’s third biggest seller for the quarter after the Land Rover Defender and the Range Rover Evoque, with wholesales (sales to dealers) of 12,157, up from 5,936 during the quarter before, according to JLR figures.
The ramp up in production of the Range Rover helped to boost JLR’s revenue per model past 70,000 pounds, CEO Thierry Bollore said on the earnings call.
However, overall orders were down by around 10,000 compared with the previous quarter following the initial spike in launch orders for the latest-generation Range Rover, Mardell said.
“We have put no marketing behind that vehicle at all. Advertising or variable marketing,” he said. “We are super confident we can stimulate orders above 100,000 [per quarter] going forward once we get supply.