Inside JLR’s battle for ‘wallet share’ against posh sofa makers

The V8-powered Defender Octa embodies JLR's effort to sell more low-volume, high-price cars

Luxury 4x4s, especially Range Rovers, have moved far enough upmarket to compete with exclusive furniture

Autocar’s group tests compare models likely to be shopped together. Jaguar Land Rover, however, has a suggestion: rather than a Mercedes, a sofa would be more relevant.

The reality today is that Range Rovers in particular have moved so far upmarket that JLR is competing with upmarket sofa companies and other luxury purchases for “share of wallet”, JLR's chief commercial officer, Lennard Hoornik, explained to investors recently. 

“It means that people do not say ‘I'm going to buy a BMW or a Mercedes or an Audi’ but say ‘maybe instead of buying my new sofas in my house I'm going to get a Range Rover’,” Hoornik told the assembled financial analyst crowd in Gaydon last month.

To be clear, he’s not talking DFS sale items here, but more like the bubbly £70,000 Louis Vuitton Bomboca. These are seriously wealthy people.

The average selling price of JLR products has increased to more than £70,000, up from below £45,000 in 2019, Hoornik’s slide deck showed. 

JLR sales are now dominated by the “big three” high-profit SUVs of the Range Rover, Range Rover Sport and Defender. Between them they accounted for 59% of the firm’s 111,180 retail sales globally in the three months to the end of June. However, the three models accounted for 85% of JLR’s “value”, CEO Adrian Mardell said at the same event. He didn’t clarify whether value meant revenue or profit, but either way their importance to JLR eclipses all other models.

So much so that this year JLR will axe five models – all Jaguars – that do little for the bottom line. “They're all close to zero-profitability products,” said Mardell. 

Only the Jaguar F-Pace SUV will survive into next year ahead of Jaguar’s remake into a luxury brand selling only EVs. The loss of cars like the E-Pace will mean JLR’s average selling price is about to make another big leap.

Selling to people with the spare cash to allocate to a luxury SUV or designer furniture is very different from the “mass premium” market that JLR now says it has left for good. “It's not so much about propulsion. It is very much about desirability,” said Hoornik.

Obviously the work going into the cars themselves to make them appealing, reliable and capable is even more important when you are perhaps spending double on the same product you were 10 years ago. But at this price point you have to work harder for customers to part with the money in the first place.

Regular dealers, for example, can’t be the only physical touchpoint. Each of the four brands – Defender, Range Rover, Jaguar and Discovery – will have a network of independent showrooms to supplement more regular outlets.

JLR now has 43 Range Rover Houses worldwide where the hard sell is replaced with more of a soft-soap approach. “It's not a small thing, it's not just a marketing activity. It’s taking people out of regular dealerships and putting them in an environment that they really appreciate, where they're not just talking about cars,” said Hoornik. “No one’s trying to get you a deal as quick as they can.”

One of the newest Range Rover Houses is in the “quaint coastal town” of Alibaug, India. This is less a dealership, more a retreat where guests enjoy “a modern luxury experience at an exclusive luxury villa”, according to the literature. Potential owners spend the day, during which they can personalise the car under the guidance of a team from the Special Operations bespoke department, or head into town on a private yacht.

Smaller Range Rover Boutiques, meanwhile, are being established in city centres – for example, in Shanghai. Whatever the size, none will have desks. “When you sit at the desk [it says] we’re going to negotiate. We don't want that and actually the customer doesn't want that,” said Hoornik.

The Range Rover House doesn’t have to be a fixed location. In April, JLR set up a bespoke, 10-day event in the Cotswolds in partnership with upmarket food company Daylesford Organic and featuring “gourmet” lunches.

The festival theme continued over at the Defender brand for Destination Defender 2023 last November in Somerville, Texas – a weekend event of “outdoor adventure and sports activities, musical performances, driving experiences, glamping and workshops”. Fans and owners of the car pay upwards of $250 to ”go and exchange thoughts about the community of the brand”, said Hoornik.

The Destination idea came when JLR figured that Defender owners were more community-minded adventure types, as opposed to Range Rover owners, who are more individual and aloof. “It's a brand for leaders,” as Hoornik put it.

The Discovery has yet to gain a stand-alone physical sales location or event, but when it does it is likely to involve families, bikes and dogs. During research on owners, JLR found out that around half of them owned a dog, leading to a special Discovery dog pack complete with unspillable water bowl.

Jaguar, meanwhile, is gearing up for the launch of the first of three ‘copy of nothing’ high-end luxury electric cars with plans for 70 ‘boutique stores’ globally, the first of which will open in Paris. “It’ll knock your eyes out,” chief creative officer Gerry McGovern told investors at the same event.

JLR wants to sell even more expensive versions of its models as part of its ‘halo strategy’. The opening of a new Range Rover House or event staging has become an occasion to build low-volume specials related to the area – for example, the Range Rover SV Burford Edition unveiled at the Cotswold bash selling at £275,000, or the Range Rover Sadaf costing $415,000 and limited to 20 examples for Middle East markets. 

The strategy has just landed with Defender and the new V8 Octa. “It helps us not just to create a halo for the full brand but also to get that price point up,” said Hoornik.

JLR reckons it can sell armoured versions of Range Rovers for up to £1.5 million, with Defenders and Jaguars maxing out at £350,000 for ‘bespoke’ cars.

JLR has been flagging for a while that it wants to sell fewer cars for more money. That strategy is definitely working. JLR posted its best annual profit since 2015 for the most recent financial year ending 31 March at £2.2 billion on an overall record revenue of £29bn.

The question remains whether JLR can keep pushing up prices as it prepares to launch six new electric cars in three years, starting with the electric Range Rover. The company’s policy is to play down the propulsion, and instead pitch the EV as being the pinnacle of the model and pricing it as such. 

By losing a factory (Castle Bromwich, where it made the Jaguar XE, XF and F-Type), finishing its deal with contract manufacturer Magna Steyr in Austria (Jaguar I-Pace, E-Pace) and giving its joint-venture China plant more independence (making Chery-platformed Freelanders), JLR doesn’t need to push volumes higher.

“Our business model is not going to be a succession of increasing fixed and variable marketing to try to keep our plants full,” Mardell told investors. “That was a mass premium model. Our model is very, very different and there's huge opportunity in front of us to excel.”