Q&A: MICHAEL LEVITAN, JAGUAR LAND ROVER RETAIL CABINET

Land Rover dealers struggle to get more inventory

Michael Levitan
Age: 57
Dealer since: 1989
Dealerships: Jaguar Land Rover Southampton, Southampton, N.Y.; Jaguar Land Rover Huntington, Huntington, N.Y.; Land Rover Glen Cove, Glen Cove, N.Y.
Average monthly sales: Jaguar: 14 new, 4 used; Land Rover: 143 new, 42 used
Quote: "Dealers don't feel we get our fair share of cars. It's a real bone of contention for the U.S. dealers today."
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While dealers welcomed a significant sales surge for both Jaguar and Land Rover in 2013, they remain cautious about investments the manufacturer is seeking as it promotes dualed dealerships representing both brands.

Dealers want to see more Land Rover inventory freed up and more marketing for Jaguar, said Michael Levitan, chairman of the Jaguar Land Rover Retailer Cabinet. Last year was the first year dealers from both brands were merged into one advisory body. Only dealers representing both brands can hold positions on the cabinet.

Jaguar sales jumped 41 percent to 16,952 in 2013. Land Rover sales rose 15 percent to 50,010. Levitan, who owns two Jaguar Land Rover stores and a stand-alone Land Rover store on Long Island in New York, spoke with Staff Reporter Amy Wilson.

Q. How was 2013 for Jaguar Land Rover dealers?

A. As a whole, 2013 was a good year. Both had challenges. From a Jaguar perspective, we saw some new products, which brought new people to the showroom, which helped traffic, new-car volume. Land Rover saw new product out, just not enough of it.

What are Jaguar's challenges?

We have challenges with floor traffic, with having customers put Jaguar on their shopping list. Once customers do come in, they find the Jaguar product very attractive.

On the Land Rover side, what are the challenges?

Getting what the dealers consider their fair share of cars. The majority of retailers today are short more than one truckload of cars every month. Their orders far exceed their ability to receive cars. The new product has put us into the position where dealers are really short of inventory.

Which nameplates are most short?

Range Rover and Range Rover Sport.

What is the factory planning to do?

You'd have to ask them. It is truly a situation that is tough to address when you have a product that's hot and short. It's the same situation in every part of the world. The dealers always feel we don't have enough product. Why can't they build more? They are trying to build up capacity. They are addressing it. It's just not an overnight solution.

Dealers don't feel we get our fair share of cars. It's a real bone of contention for the U.S. dealers today.

Can it be alleviated in 2014?

No. I think you'll see some additional product, but I don't believe it becomes alleviated.

When you have a product that's sold out, it's not like you can order 10 and you get 10. You have 10 orders and you only get two, so eight people are waiting. The next production you get two more, but you've got 10 more orders. So now you've got 20 people but you've only been able to serve four of them.

How is dealer profitability?

I can only speak to my own dealer group. We do well, but we've got combined facilities. We've offset some of those costs that perhaps a stand-alone dealer would be unable to do. From my perspective, it's a profitable franchise.

What are the biggest issues or challenges in 2014?

Let's start with Jaguar. It's the challenge we've had all along: Making that car and putting it on somebody's shopping list. Improving the profitability of the brand itself is a continued aspect of it. We're hopeful the launch of the F-Type coupe that we'll have some additional traction for that car.

For Land Rover: Deal with an equitable allocation system. We also have a new product coming in: the long-wheelbase Range Rover in the next couple of months. We're looking to repeat [2013's] performance and then some.

What is missing from the Jaguar product line?

No. 1, it's that crossover vehicle. They have nothing like it, where other brands have a CUV or a small SUV. Brands like Mercedes, BMW, Audi, all have an alternative to their sedan lineup. If you're not a multibrand dealer, there's nothing [like that] you can offer to someone if they walk into your Jaguar store today. That is a large growing segment. So we truly miss that in the Jaguar brand.

And we miss an entry-level affordable Jaguar to really start the lineup off: a smaller sedan, similar to when we had the X-Type.

What are the plans for the entry level and crossover?

The crossover they showed in L.A. When it's coming and how soon, someone at JLR has to give you that. And if it truly is going to come. If I were a betting person, I'd say yes.

But they haven't confirmed it to the dealers?

No.

What about the entry-level sedan?

Ultimately it will come. I'm sure they'll tell you they have plans for a small crossover and a small sedan as well.

What's missing on the Land Rover side?

An entry-level vehicle that's affordable. Today we have such a vehicle, but it lacks a bit in looks and in being able to lease in a competitive way. That's the LR2.

What do you hope to accomplish for the dealer body this year?

We would like to, No. 1, square away some marketing for the Jaguar brand and look for a consistent message we can carry forward. Restore and improve the profitability of the Jaguar brand. Continue to pursue high quality in fixed operations. There's been a perception of quality [problems] on the Jaguar side. They're thinking of a much older car, so we always are very mindful of keeping our eye on quality. The quality level is the best it's ever been, but it surely has room for improvement.

Your goals on the Land Rover side?

A fair and equitable allocation system. Keep dealer profitability at the levels in [2013] if not improve them. Keep an eye on quality.

The other thing that's a high priority is the relationship we have with JPMorgan Chase, our preferred lender. We strive to make it no different than a captive finance company. It has come a long way, and those communications continue. Can it be better? Yes. Is it bad? No.

Is there a specific improvement you want to see from the relationship this year?

It ultimately comes down to better lease options.

What is new on the facility front?

JLR is still trying, when in a market they feel can handle it, to put Jaguar and Land Rover together, making it one facility.

There are expectations in coming years of increased volume. They've gone to dealers to make sure they're ready for the increased volume. Are their facilities big enough, new enough, up-to-date enough? So there's pressure, but not undue pressure, of having updated facilities and making sure retailers are ready for what's coming in the future.

How is the dualing strategy coming along?

The issue becomes emotion. You usually have two dealers that are emotional about their brands. They both become buyers and nobody becomes a seller, and it becomes difficult in some instances to put those two together. Emotion gets in the way all the time.

Is JLR content to let this happen organically or are they out shaping these deals and trying to make buy/sells happen?

Yes. They're trying to make certain things happen by going into a market and having discussions, but that's as far as JLR gets involved.

Are there incentives or punitive actions if a merger doesn't happen?

No.

How is the combined dealer cabinet working?

It's working well, but I think a stand-alone Land Rover or Jaguar dealer feels their interests are not as voiced as they have been in past. I don't necessarily agree with that.

When the two councils came together a year ago, some stand-alone dealers were unhappy. Is that still the case?

Their sentiments haven't changed. I believe they've accepted it.

What do you expect for sales in 2014?

My expectation is we'll see an increase in both brands. For my budget for my dealer group, we used a moderate increase.

Do you expect an increased marketing budget?

Yes.

JLR has talked about getting combined sales to 100,000 units. When could that happen?

It can't happen soon enough. We're cautiously optimistic because this is not the first time we've been promised certain volume levels, frankly. So I think [dealers] look at it with a bit of caution. More on the Jaguar side than the Land Rover side.

Would that kind of a number be several years away?

Yes. That would have to be a combination of if the small sedan comes, if the crossover comes, probably another model in the Land Rover mix someplace. A lot of things have to work to get there.

That goes back to the facility question: On one side you have JLR saying we've got to gear up for the future -- a build-it-and-they-will-come kind of thing. And some of dealers have done that already. They've built it, and it didn't come.

So they are wary about those kind of investments?

Yes, cautious. Frankly I was one of those dealers way back then. I built a new facility for Jaguar because the volume was there.

Everything was great, and all of a sudden the volume went from 50,000 to 30,000 to 25,000, and then why don't we put Jaguar and Land Rover together? In the beginning, I was against it. In hindsight, it was the best thing I could have ever done. It makes logical sense for the brands. Our problem with JLR is that it's two brands under one roof that you're trying to identify in two different ways. So the marketing becomes a little bit tougher.

Are you on board with it now because you think the products complement each other but also because there are cost savings?

Absolutely. There are cost savings in management, some advertising, back-office practices, fixed operations. And there's a cost savings frankly in one facility as opposed to two.

What do dealers expect from Joe Eberhardt, the new president of Jaguar Land Rover North America?

Joe and I had a conversation before the holidays. He wants to see the dealers profitable. He's listening to what everybody has to say.

What else are dealers seeking for 2014?

A hot topic right now is exporting. When you're short of product, you don't want the product to leave the country. It's a problem for the retailers. It puts you on your guard and makes you do business in a way that's not as comfortable. You become way too suspicious of everybody. Sometimes your instincts are completely right, and other times your instincts are completely wrong.

What are retailers asking for?

They're asking for what's the best way to handle it. We ourselves do a certain amount of due diligence. We've asked the manufacturer to produce a letter and not to have the responsibility on the dealers. And the manufacturers don't want to do that.

Because they don't want to be held liable. Their attorneys have advised them they shouldn't do that. My attorneys have advised me I shouldn't do it either.

But, yet, we'll do it. We'll give someone a letter that says if we find you have ultimately exported this car, there's punitive damage. I can have every customer sign it, but it really has no teeth. It would be much better coming from the manufacturer.

It probably creates hard feelings with customers?

It absolutely does. Some people think we're discriminating against them and, in some cases, frankly, we probably are. It's sad but it's true.

You can reach Amy Wilson at awilson@crain.com.


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