Jaguar LandRover - UK inaction versus China's decisiveness

All,

On Saturday, reported in the Times, Jaguar LandRover secured RMB 5bn (£560m equivalent) 3yr unsecured revolver for its Chinese subsidiary.  For clarity this is not the JV with but a 100% owned subsidiary of Jaguar LandRover Automotive Plc. This is a welcome support, at unsecured level, but we still await specific support from the UK government.  

Additionally, in the Telegraph this morning there is an article speculating about a scrappage scheme in the UK for upto £6,000 to scrap old diesel and petrol cars for new electric cars.  This would be a boost to the auto industry, but only marginal to Jaguar LandRover, given its premium price range.

In relation to Company specific news flow, the Company is unlikely to reopen its Castle Bromich plant until August - some two months after most European manufacturers have re-opened their facilities.  This site, which employs 2,300 people manufacture the Jaguar F-Type, Jaguar XE and XF for the European market.  This points to significantly reduced demand in Europe for the Jaguar suite of cars.  

The LandRover specific plants, Solihull, which opened in May, and Halewood which is due to open this week points to greater certainty on the LandRover models.  The Chinese factories reopened in February and Chinese data would indicate a strong demand for premium brand cars.  

Conclusion: The securing of c.£560m unsecured revolver via Chinese subsidiary is a positive to the overall credit.  Although the Company is currently benefiting from the UK furlough scheme, the delayed reopening of the Jaguar sites is a concern.  We maintain our current position  long the 26’s short the 21’s.

Any questions, please do not hesitate to contact me.

Tomas