The plummeting of demand in the Chinese market, dropping sale of diesel engines and a one time reduction to the value of its business were the primary factors that drove the United Kingdom based automaker Jaguar Land Rover to report its largest loss in its history for its operations last year with a net loss of £3.6 billion.

In the fourth quarter of the year, the largest car marker of the UK showed signs of a return to profitability when the India’s Tata Motors’ owned company reported a £120m pretax profit. But that profit was offset by the very large loss for the entire year as a whole, primarily because of the one-time write-down in the third quarter of the year. Almost 50 per cent of the £3.1bn non-cash charge was attributed to the acceptance of JLR accepted that its earlier investments made in property and machinery were of much less worth than the company had portrayed previously. The rest half of the write down was accounted for by goodwill impairments which is an accounting term used to reflect the likelihood of reduction of future earnings potential.

The company still made a pretax loss of £358 million against revenue which was down to £24.2 billion in 2018 compared to £25.8 billion in 2017 even after excluding such one-off, non-cash items.

The reason for this as accounted for by the company is the demand weakness in the Chinese market where the company reported a 6.8 per cent year on year drop in sale with sale of 578,915 vehicles. That performance offset the gains made by the company in revenue generation in the UK and North American markets with sales growth of 8.4 per cent and 8.1 per cent respectively.

The sale of the company was also affected by reduced sale of diesel vehicles driven by a number of global pollution scandals and a consistent uncertainty related to Brexit. Earlier this year, plans to cut down on 4,500 jobs was announced by the company and claimed that the company had benefited by £1.25 billion of savings in efficiency.

“Jaguar Land Rover has been one of the first companies in its sector to address the multiple headwinds simultaneously sweeping the automotive industry. We are taking concerted action to reduce complexity and to transform our business through cost and cashflow improvements,” said the JLR chief executive, Ralf Speth.

There have been a number of major auto companies that have issued severe warnings about the potential impact of Brexit on their UK business and JLR is one among them. The auto companies are also very weary of the consequences of a no-deal Brexit.

JLR did not make any mention of Brexit but rather gave details of its plans of further investments in its British business despite rising concerns about the company further bringing down its presence in the UK. The investments would include in the areas of assembly of electric drive units and battery packs in the UK as well as in the manufacturing of new Range Rover models.

(Adapted from TheGuardian.com)