In an increasingly polluted world of congested cities and long commutes to work, do luxury cars have a future? And as much of the world recovers from the Covid-19 pandemic and returns to work, will preference for private transport drive the growth of luxury cars, as well as all the others?
We have seen the luxury industry rebound from the pandemic lows, much earlier than others thanks largely to the quicker recovery of China and also to a few brands from the LVMH stable, as I had mentioned in a previous blog post of mine. The pandemic also saw many newly minted millionaires and billionaires, as well as the wealth of their tribe grow, thanks to certain sectors doing well and the soaring stock market. Bentley is reported to have seen record sales last year and Mercedes-Benz has seen a significant growth in revenue, as we emerge from the pandemic.
Leaving aside the pandemic for a moment and looking at the longer term, we realise that luxury cars, though, are in a slightly different situation from the general luxury industry. Being part of the automobile industry, they are impacted more by the trends in that particular industry, than by general luxury. And luxury cars are known to be big gas guzzlers, large for driving in most crowded cities and take up more parking space than most others. It appears, therefore, that they are on the wrong side of history and sensible public policy.
Well, it needn’t be so. Already Tesla is driving change across the industry globally and so is China. They lead the world in electric passenger vehicles and are moving toward autonomous and connected technologies. The good news is that most of the industry is following, not least because governments, urban planning requirements and public policy are driving them to consider change. Climate change and more environmentally friendly policies are imperatives today and will be even more so in the future.
China leads in electric car manufacture and EV battery technology, while many of the Scandinavian countries – Norway, in particular – leads in electric car usage. The sooner countries prepare for this shift in automotive technology and transport, the better it is. In India, we have been hearing talk of electrification for years, but only this year have some states like Maharashtra and Gujarat – both big automobile manufacturing hubs – announced measures to incentivize EV manufacture. The Indian government is said to have reduced the GST for electric cars to 5%, as an incentive. I have always been of the view that GST for most cars, excluding luxury, should have been reduced to 18% from 28% years before the pandemic, and that on electric cars it ought to be at a reduced 10-12%. Of course, a necessary prerequisite for electrification of cars to be truly environment-friendly, is that the source of energy too must be other than fossil fuels; unfortunately in India most of our electricity is thermal power generated in coal-fired power plants, not even natural gas-fired ones.
With ride-hailing on the rise in most cities across the world, better public transport, and a hybrid working model, hopefully our cities will see a cleaner and greener future. As I have written before on my blog, in which I cite a McKinsey study on mobility, mobility as a service (MaaS) is also going to dominate in the future, and I think that it might be here sooner than autonomous. Ride-hailing is already a form of mobility as a service and with electric, more connected vehicles in future, MaaS will reduce pollution, congestion and increase safety in our cities.
All luxury carmakers are already seized of the need to shift towards this future and most have announced a fully-electrified, or at least 50% electric range of passenger vehicles by 2030. The way the automobile industry is headed in the future, I see luxury cars growing along with these expected technological changes. As I have written before on my blog – including in the context of JLR and Tata Motors – most car manufacturers will have to decide if they want to be in the business of manufacturing cars or in managing the mobility service. Not very different from airlines, where aircraft manufacturing is left to a few, while many more companies are in the business of providing air travel.
However, even if some of the luxury cars adapt to mobility as a service (either as ride-hailing or as car-rental) private ownership of luxury cars will always have its own charm. And in the case of luxury sports cars, even more so. For the people who drive luxury sports cars do so for the love and thrill of driving, and that is not going away.
Which is good news for a brand like Jaguar from JLR, part of Tata Motors. Currently it does less well than Land Rover, and I believe it is mainly because the brand lacks a clear brand positioning. Lately, though, the brand has been doing better thanks to the launch of the all-electric Jaguar I-Pace (it goes head-to-head with Tesla in the US), which sold 7,807 units in the last quarter of FY21, up by 69.3% since the same quarter in the prior year, according to JLR’s website. The Company also says that it has achieved 43.3% electrification in its product sales in 2020.
Since I have recently been writing and sharing brand strategies and ideas for JLR and Land Rover on my blog, I thought it made sense for me to share my thoughts and ideas for Jaguar as well. These are thoughts that I wrote down years ago in a notebook and lost to termites at my parents’ place in Goa, so here is an attempt to recreate them from memory. You can read my brand strategy and ideas for Jaguar by clicking on the link below.
I have taken care to ensure that the strategy and campaign ideas I recommend for Jaguar work for the brand in its current form today, as well as in the future when it adapts to mobility as a service. What the Jaguar brand needs in my opinion is a strong dose of technology and design to give it gravitas and to elevate it to a futuristic level. Not only can Jaguar take a leap into this exciting future of electric, connected and shared mobility, it can create a separate, new range of sportscars that are almost like supercars, meant to be owner-driven for the sheer thrill of driving a sports car. This will fuel research and innovation at JLR and at Tata Motors.
One might end up with a world of mobility in the future, therefore, that comprises luxury mobility accessible to more people – due to democratization through technology – and also raises the level of private ownership of luxury cars to a new supercar level. Staying with the airline analogy, road travel will become more like air travel, with luxury sports cars becoming the new private executive jets.
And hopefully, all this will make the world, cleaner, more connected, and safe, to travel in.
The featured image at the start of this post is of the Jaguar E-Pace (PHEV and MHEV SUV launched globally at the start of 2021) from JLR’s corporate website.