A new compact SUV helped Land Rover finish U.S. sales up 20 percent. But dealers say sales could have been higher had there been more product.
The retailers worry that 2011's inventory constraint won't improve this year. For example, the new Range Rover Evoque crossover has as much as a five-month waiting list for some dealers.
And with the redesigned Range Rover coming this fall, having enough in stock will be critical to the vehicle's success, dealers say.
Staff Reporter Jamie LaReau spoke with Dan Muggli, chairman of the Land Rover Business Operations Council. Muggli is not a dealer principal, but he has run Land Rover Portland since 1994. His term heading the council runs from January 2011 to January 2014.
What are the biggest issues facing dealers in 2012?
The single biggest issue is lack of supply. Since we began recovering from the worldwide crash and our products made a big improvement for the 2010 lineup, our products have been constrained and look to be constrained again in 2012.
As international markets exploded, Land Rover, being a relatively small company, is struggling to meet the demand in all those markets.
How is the new Range Rover Evoque doing? Is there adequate supply?
It's doing great. It's nothing close to being adequate supply. If you were to order a new one from us now you'd be talking about a May delivery. The pipeline is not what we'd like it to be.
When you factor in the presold units we have right now, the delay would be about a five-month delay.
Does the long delay impact sales?
Yes. Many people come and look at colors and want to pick one out, then they find out the reality of the delay. We've been able to thoroughly sell the product and convince people it's worth the wait.
We've been very careful not to sell out everything we've got in stock. We've been disciplined about that to keep cars here to demo and display. But you're not going to get them all with that kind of delay.
Is the new compact SUV bringing in conquest buyers?
Yes, without a doubt. I'm not sure it's quite the percentage that Land Rover thought it would be. They thought it would be an extraordinary high number.
A lot of our customers have been screaming for a more fuel-efficient product for years. We have a very environmentally in-tune community, and people want to present the right image.
How are the Land Rover LR4 and LR2 doing?
The LR4 had a great year. The exterior design that was initially polarizing for some has become more pleasing, and they warmed to the idea. It's a form-follows-function design. It's just brilliant, and people really love that car. We're selling every one of those we can get.
The LR2 has done less well. We're also supply-constrained on that car. The manufacturer has not chosen to put a lot of emphasis on that car. We'd like to see a better supply and a more aggressive lease support.
Will the United States get the new generation of the Defender?
We certainly hope so. There has not been an official announcement of that, but we've heard any number of times from executives in the U.K. how important it is to us and encouraged us that the car will be designed for this market as well.
We've heard talk in the media for the 2015 model year, but they have not confirmed any product or date.
How important is it for the lineup?
It's tremendously important. We haven't had the car in our lineup since 1997. To this day we have people come in asking for them. It's the icon of the Land Rover brand. If they can get the product right, and I have a lot of confidence that they will, it could be a very significant volume seller for us in the U.S. as well as serving as an icon for the brand.
When will hybrids be sold in the United States?
Land Rover has not made any official announcement, but we understand they're developing gasoline hybrids, diesel hybrids, light hybrids and plug-in hybrids. They're working on the whole range.
There's no doubt, to meet the upcoming fuel economy regulations, we'll need a combination of lighter weight vehicles and more efficient powertrains. They're working on both of those very aggressively.
Is the aging Range Rover still competitive against newer vehicles?
The full body Range Rover still is; it's still considered peerless. We're less than a year away from the replacement vehicle now, and it continues to be a big seller for us. There's no equal for that car.
What are the lingering quality problems?
The quality problems have overall improved dramatically. From a dealer's perspective, we can easily measure that as we watch, year-after-year, our warranty sales declining. That's a short-term business problem because you lose revenue over those warranty sales, but it's a good long-term benefit for the brand.
The remaining quality problems vary. More and more they tend to be software related. There's so much complexity in our vehicles these days. It takes a couple of generations of software to get the glitches out.
What can Land Rover do to improve quality?
Sometimes the quality problems are not just a feature that's not working properly; it's a feature that isn't there that the customer wants to be there. Or it's something that's there that the customer does not want.
Sometimes there's a buffer between the design and the customer.
I'd encourage Land Rover to be communicating with the customers through the dealers who are actually dealing with the customers every day. That's an area that can be improved upon.
What's missing in the product lineup?
In our market, we've long heard requests for diesel-powered vehicles. In terms of vehicles, with our Land Rover brand we have enormous opportunity. We're basically missing and not capitalizing on the LR2 segment. We're getting very few cars. Land Rover needs to look at how they can approach that segment. It's not a baby Range Rover; it's a more volume-oriented segment.
I encourage them to look at Subaru, for example, which sells about 250,000 all-wheel-drive vehicles a year. That proves there's a market for compact all-wheel-drive utility vehicles, and we haven't found it yet and we need to. We have the brand to do it and the engineering know-how to do it. We just need to make it a priority in this market.
The LR4 is a success, but that's only two models and there's room for product extension. We hope the Defender will lead the way to extend that brand.
We'd like a lighter-weight seven-passenger vehicle that is equipped, priced and lease supported to do some volume with.
In the Range Rover side, we love all three of our Range Rover products and we love what we see coming down the pipeline. But there's a big gap in size between the Range Rover Evoque and the Range Rover Sport. So that suggests to me there might be room for another Range Rover vehicle.
What new vehicles are coming?
Everything in our product line will be redone in the next three years and additional products will be created to complement them. So we'll have a lot of new and exciting products to talk about here in the next five years.
How much contact do Land Rover dealers have with the factory?
When the engineers are visiting in New Jersey they reach out to the local dealers. The New York and New Jersey market is their largest volume market so it's easy for them to swing over and talk to them.
But the factory's missing some issues. Those dealers are more focused on selling Range Rovers, so I think the factory is getting a distorted view. They'd do well to visit dealers in different markets around the country and truly hear what's on customers' minds.
Are Land Rover dealers profitable? Do you expect them to be profitable in 2012?
Yes and yes. I heard from Land Rover executives and by their calculations we're the fifth most profitable franchise brand in this country in terms of net on sales.
Are you making money on new-car sales?
Yes, we're making money on new-car sales, used-car sales and parts and service.
What can the factory do to help you sell more vehicles?
Another issue the factory really needs to pay attention to is distribution.
It's possible to do a better job of distributing the cars on a fairer basis particularly to the dealers outside the New York/New Jersey area. There's a lot of concern about that.
I don't think there's an ill will there. The factory thinks they're doing it fairly. But there are factors that haven't been taken into account.
The pipeline from the factory to some dealerships is a shorter distance than to others. So those with the longer distance are at a disadvantage. It's a challenge to fix that. You could say we're just going to use the current inventory as the deciding factor rather than also counting those vehicles in the pipeline. But that invites fraud in dealer reporting. I can't say I have the perfect answer for them, but we need to work together because it's a problem and it compounds over time.
Will working with the factory to improve distribution will be a priority for you on the council this year?
What are Land Rover dealers doing to attract more service business?
For years we didn't think of marketing service because our problem was to keep our doors from being beat down from all these cars with problems.
Now most dealers have smaller service staffs. We do need to be sharper on merchandising. We've installed a new customer relationship management system, which gives us tools to target those customers on a regular basis.
Even with the new cars the service intervals have been extended from 3,000 miles for service to 15,000. So we're seeing customers a lot less than we used to. But when we see them we sharpen our programs to watch for a very careful examination of tires and tire wear and be sure we offer full service tire replacement at a competitive cost. It's hard work now to make sure we can get every bit of business available to us.
We're also reaching out to older Land Rover customers we haven't seen in a while.
Is there any new dealer facility program?
Yes. There is a refresh campaign that is under way. Pretty much 100 percent of the dealers have signed to the first phase of it, which is a signage program that had to be completed by the end of 2011.
In terms of the facilities, some of our older facilities need an extensive cosmetic interior refresh to be completed before the end of 2012 and also do some light interior work. The other stores will have until the end of 2013 to complete it.
Land Rover has some new leadership with new initiatives and programs coming. How do you feel about that?
There is sensitivity among the dealers that we not lose the program that sustained us through the years when we had quality problems. We followed the Land Rover Way, which is a whole philosophy about doing business. It affects all parts of our business.
So as we're modernizing our programs, our procedures and facilities it's important that we not lose the best of the Land Rover Way.