The Falling Price of Luxury Cars

If Jaguar slashed the price of its cars by 75%, demand would go through the

roof. So what’s going to happen now Ford is slashing the price of Jaguar?

It’s interesting to see how the price of Jaguar and Land Rover has evolved

in press reports since they came

on the block in June. Back then, the asking price was reportedly in the

neighborhood of £3 billion, which is $6 billion. A sale at that level

would at least recoup Ford’s initial investment in the marques – it

bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.75 billion in 2000

– although of course Ford has pumped a lot of money into both brands since

it bought them.

Fast-forward to Friday, when Roland Gribben of the Daily Telegraph reported

that "Ford is facing pressure to lower its sights on the asking price".

He didn’t say what the new price would be, but did say that "analysts feel

Ford may have to settle for less than the £1.5bn it is believed to be

seeking for the marques." That’s $3 billion, for those of you keeping track

at home.

And today, the Wall Street Journal starts throwing around some much

lower figures still:

The acquisition, which could cost more than $1 billion…

With Jaguar and Land Rover burdened by unfavorable exchange rates, a relatively

high cost base in the U.K. and potentially expensive new environmental regulations,

some analysts are skeptical of Ford’s ability to command a hefty price for

them. Merrill Lynch & Co. estimated earlier this year that the combined

sale of the Jaguar and Land Rover brands would raise $1.3 billion to $1.5


It’s worth remembering that in March, the marques were not for sale at all;

now, it seems, Ford is so desperate to offload them that it will accept a relative

pittance for them.

It is true that it’s hard to imagine an environmentally-friendly Jaguar or

Land Rover. But luxury in general, as an asset class, is doing very well these

days. That said, anecdotal evidence from a week spent on and around Lake Como

suggests that Porsche seems to be the marque of choice among well-heeled Europeans.

Maybe the trick is just to make a narrower car, which will maneuver

more easily around the cobblestone streets of Cernobbio or the City of London.

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