Jaguar Land Rover makes and sells Jaguar and Land Rover vehicles. It is a wholly-owned subsidiary of India-based Tata Motors. Ford bought Jaguar in 1989 and Land Rover in 2000 and brought them together to build up its premium car business in 2002, but sold them to Tata in 2008.
Car sales pass crash test
CAR sales for the first five months are down a surprisingly modest 9.5 per cent from last year, according to the Motor Traders Association of Hong Kong.
There were 18,100 vehicle sales from January through May, against 20,000 last year for the same period. Not bad, when you consider how miserably the property and stock markets have fared.
But the numbers - inflated by orders dating back to last year - mask deep structural problems that point to depressed sales stretching way out into next year and perhaps beyond.
Discounting of 15-20 per cent and more in the mid-range segment signals plummeting income at one end, and in the luxury market, where discounts tend to lessen the value of the brand, dealers are watching orders drop by up to 50 per cent.
Both segments are being walloped by parallel imports. As the recession deepens across Asia, a booming grey market keeps eating away at Hong Kong's traditional car franchises - undoing business assumptions that have prevailed for years.
The grey market has plunged mid-range dealers into price wars, and the luxury segment has been hit by grey-market dealers who have descended like locusts on the secondary market.
Owners who would be glad to freshen their image with a new car find themselves stuck with their old chariots because they cannot get the price their models would normally fetch.
Lexus broke ranks with luxury dealers and cut prices, which have been gyrating between the mid-$600,000 and $800,000 levels, according to one industry source. Giveaways in the showroom ended up savaging the used market.
Grey-market cars are priced so close to used models that buyers who normally keep to the used car lot are taking their chances and buying new. The option looks especially tantalising, given how financing works. Full financing for a new grey model - even though it comes without warranties and could bankrupt the buyer down the line - is easier to arrange than negotiating a loan for a used car.
ABN Amro said most sales on Zung Fu Mercedes' business books this year were actually closings from last year's backlog, an analyst said.
Mercedes has order lead times running to six months. According to one industry insider, it was sluggish delivery of Mercedes models from Germany two years ago that whipped up the grey market in the first place. Buyers running out of patience found they could get cars faster and cheaper through parallel importers shopping in Southeast Asia.
With economies collapsed across the region, cheap mid-range cars now stream in from screwdriver assembly plants in Malaysia and Thailand. As luxury showrooms close down across the region, upmarket cars are being hauled away and shipped to Hong Kong for discounts of 30 per cent or more.
The ABN Amro analyst said Zung Fu could see sales drop up to 50 per cent this year. Apart from grey-market problems, and recession-related sales fall-off, the Mercedes market was caught in a cyclical trap, he said.
'They have new models coming out in December 98, so you are probably looking at delivery in the first half of the new year,' he said.
Like consumers holding off computer purchases anticipating the latest Macintosh, Mercedes buyers were waiting it out to see the new models, he said.
'A lot of sales are driven by model cycles.' One man who watches lead times carefully is Bill Lau, general manager of Inchcape unit Jaguar Hong Kong. He said buyers were so fickle that they would turn on their heels if there were delivery delays and buy a completely different make in Gloucester Road's grey market. Buyers, he said, only distinguished between luxury and non-luxury, not between marques.
'The last thing you want to be told is you have to wait six months for your toy,' Mr Lau said.
Jaguar Hong Kong sold 20 cars in a good month, he said, largely to corporate buyers. Sales were down 20 per cent on last year.
Jaguar Hong Kong is pinning its hopes on a new, smaller S series version priced at $600,000. When the new models arrive, they might look like an option for people who travel at these stratospheric spending levels. At present, the cheapest Jaguar in the room sells for $738,000.
'[Jaguar] is a niche product, and we have strong support regardless of economic conditions. The owner base is strong,' Mr Lau said, adding he knew of only two repossessions this year.
Inchcape, according to one insider, owns 40 per cent of the Hong Kong market. But Mr Lau said Inchcape's car finance unit had kept to conventional lending, without resorting to eye-popping interest breaks to blast car sales out of their depression. It was 'very competitive', but nothing out of the ordinary, he said.