Jaguar May Find It's a Jungle Out There

The X-Type faces tough competition in the luxury market

BMW owner Silke Friedrichs has been itching to buy a new, entry-level Jaguar X-Type ever since she first saw pictures of it in a magazine last fall. The 37-year-old Berlin public relations consultant has been following the car's progress and says she plans to trade in her BMW 5 Series in May when the new sedan becomes available in Germany. "Everyone in Germany has a BMW," Friedrichs says. "This Jaguar is so sleek and sporty and elegant."

That's music to Phil Cazaly's ears. The head of Jaguar's global marketing operations says such first-time buyers are absolutely vital to the worldwide success of the $30,000-plus X-Type. After years of drivers' protests over lousy quality, Jaguar is regaining credibility under Ford Motor Co., which bought the British carmaker in 1989. A successful X-Type launch, pegged at 100,000 units a year, could double Jaguar sales by 2002 and help improve profitability by spreading the costs of manufacturing over a broader base. And the lower-priced, entry-level luxury X-Type sedan is key to attracting younger buyers to the Jaguar brand. The styling--with its long lines, tight front grille, and low-to-the-ground design--deliberately echoes the look of the Jaguar XJ, the most expensive and quintessentially British model in the Jaguar lineup. The message: Luxury styling at an affordable price.

But a lot has to go right for Jaguar's new car to be an international hit. The small sedan has to have enough panache to claim Jaguar status, while what it has under the hood has to satisfy tastes on several continents. Its six-cylinder engine is a big guzzler for most of the world except the U.S. European buyers, accustomed to more efficient, money-saving engines, won't be able to buy a diesel-powered model, at least for a few years. Then there's the question of how luxurious this luxury brand is: The sedan is based on the proletarian Ford Mondeo platform. Though Mondeo-derived parts account for only 30% of the X-Type, that may still turn off the more style-conscious consumers in Europe.

Ford is spending about $500 million a year to turn Jaguar into a high-volume luxury brand, estimates John Casesa, auto analyst with Merrill Lynch & Co. Casesa predicts revenue will grow from $4 billion this year to $9.5 billion in five years. "The growth story at Ford is Jaguar," he says. And the growth strategy for Jaguar is the X-Type. "This is a make-it-or-break-it car for Jaguar," says Wolfgang Reitzle, head of Ford's Premier Automotive Group.

But each market presents a different challenge for the sedan. In much of northern Europe, where Jaguar still is seen as quirky, the X-Type has to overcome the German preference for high-performance BMW and Mercedes-Benz models. In Southern Europe, diesel is key, and there are no early plans for a diesel X-Type. In England and Japan, meanwhile, buyers want a Jaguar to be heavy on British pedigree, Cazaly says.

WIDER REACH. Jaguar expects easy victory in the U.S., where the company plans to sell 50,000 X-Types. The $42,000 mid-luxury, retro-look Jaguar S-Type sedan, introduced in 1999, did pretty well in America. So Ford planners are gambling that a move further downmarket with the X-Type will win converts without alienating richer Jag owners. The X-Type's lower price point will also make the stylish brand more accessible to minorities and young buyers, says John Wolkonowicz, a consultant at auto-consulting firm Bulin Group in Detroit. "The Jaguar name is revered among consumers," Wolkonowicz says. "Suddenly, you can buy one for $30,000."

The competition hasn't been sitting still. Mercedes has recently refreshed its C-Class coupes and sedans. Lexus also just introduced the IS300 and Honda has a new Acura 3.2TL in the entry-luxury segment. Audi's new A4 sedan is coming on strong, and the BMW 3 Series is still enjoying brisk sales. Even Jaguar's siblings at Volvo and Lincoln will have offerings in the segment.

But if Ford can achieve the growth it predicts, Jaguar's outreach efforts will do the right thing for profits. Casesa estimates that the X-Type will have aftertax profits of $2,500 per car, twice those of the Ford Mondeo. Provided, of course, buyers like Friedrichs don't think they are just buying a Ford with a fancy hood ornament.

By Jeff Green in Geneva and David Welch in Detroit

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