Jaguar Land Rover posts heavy loss as China demand slows

The United Kingdom's largest carmaker, Jaguar Land Rover, has suffered heavy losses due to slowing demand in China and will initiate a 2.5-billion-pound ($3.2 billion) plan to cut costs, the company announced on Wednesday.

Jaguar Land Rover, which is also known as JLR, reported pretax losses of 90 million pounds in the second quarter of this year, when retail sales declined by 13.2 percent on the same period in 2017.

The automaker cited a range of factors that contributed to the profit losses, including slowing demand in China, uncertainty brought on by the UK's pending exit from the European Union, weakening demand in Europe for diesel engines, and the EU's introduction of new emissions and fuel efficiency procedures.

"In the latest quarterly period, we continued to see more challenging market conditions," said JLR's Chief Executive Ralf Speth. "Our results were undermined by slowing demand in China."

Speth added that, given the challenges, Jaguar Land Rover "has launched far-reaching programs to deliver cost and cash flow improvements".

"Together with our ongoing product offensive and calibrated investment plans, these efforts will lay the foundations for long-term sustainable, profitable growth."

Under "Project Charge", the company plans to cut costs and improve cash flows by 2.5 billion pounds during the next year-and-a-half.

Major UK trade union Unite said it will press JLR for further details on its cost-reduction scheme. JLR employs 40,000 people in the UK and has already cut 1,000 jobs this year and temporarily closed its Solihull plant in the West Midlands, which employs 9,000 people.

"These uncertain times for car workers have been compounded by the government's confused approach to diesel and botched handling of Brexit," said Des Quinn, Unite's national officer.

During the summer, JLR suffered its first pre-tax loss in three years after a slump in Chinese sales.The company expected the downturn to be temporary because China announced plans to cut import tariffs on new foreign vehicles, from 25 percent to 15 percent, from July. However, Chinese sales remained sluggish.

Chinese car sales fell by 4 percent in July, 3.8 percent in August, and 11.6 percent in September compared to the same periods last year, according to the China Association of Automobile Manufacturers.

JLR said escalating trade tension between China and the United States has dented consumer confidence in China.

The carmaker also faces wider industry pressures. The 2015 Volkswagen emissions scandal and unfavorable diesel-engine tax regimes have caused European diesel sales to dip. And in July, Speth said JLR could see annual losses of 1.2 billion pounds if the UK government fails to negotiate "tariff-free access and frictionless trade" with the EU.