Jaguar Land Rover's decision to shed 4,000 jobs comes after the carmaker has travelled down a very rough road.

The company has seen sales fall in all of its major markets and it has been dealing with the consequences of a devastating cyber-attack that paralysed production last year.

At the same time, it has been investing billions in an effort to reinvent itself for an electric future, in which it is likely to face intense competition from aggressively expanding Chinese brands.

Executives have now decided a major overhaul is needed.

One of the main concerns for JLR is China. Not so long ago, it was seen as a land of opportunity for western carmakers, where the rapidly expanding middle classes seemed to have an inexhaustible appetite for upmarket foreign-badged vehicles.

JLR, along with other European brands such as BMW, Audi and Mercedes Benz, was all too willing to meet that demand, at a time when the European market was extremely crowded and growth hard to find.

Today, things are very different. The past decade has seen rapid growth among domestic Chinese carmakers, firmly backed by their government, which has been determined to make the country a leading player in electric vehicles.

This has created an environment of intense competition, in which local manufacturers have rapidly raised the bar in terms of technology and development speed.

That, combined with a slowdown in the Chinese economy, has made China a much more difficult market for European brands.

JLR's sales in China fell from a high water mark of 146,000 cars in 2017 to just 62,400 in the last financial year. At the same time, competition and a new luxury car tax have hit profit margins.

All of this has resulted in a sharp fall in revenues from the region. JLR is not alone in this; the Volkswagen Group, for example, has also seen its earnings in China pummeled – a major factor in its decision to axe 100,000 jobs by the end of the decade.

The state of the Chinese market has had another consequence for European carmakers, including JLR. Faced with cut-throat competition, they have been flexing their muscles abroad.

Companies such as BYD and Chery have been rapidly gaining market share in the UK and Europe – with the Jaecoo 7 the third best-selling car in this country over the first half of the year.

Analysts say traditional brands will face an uphill struggle to compete with new rivals, who can sell cars more cheaply and develop them more quickly.

The US is also a major market for JLR. In the year to the end of March 2025 it sold more than 120,000 cars there. The following year, that figure had fallen to just under 100,000.

Part of that could be attributed to the impact of the cyber attack, which paralysed JLR's output in September 2025 and caused disruption through the tail end of the year. It affected JLR worldwide and cost the company £1.9bn.

But sales and profits were also hit by the introduction of import tariffs by the US, and subsequent uncertainty over the levels of those tariffs. As automotive analyst Matthias Schmidt puts it, the company is "seeing a head-on hit each time a Land Rover rolls off a ship onto US soil".

JLR is now planning a partnership with Stellantis to build new Defender-badged vehicles in the US. These cars, which would be developed specifically for the US market, would not attract tariffs.

Then, there are energy costs, which affect JLR and its rivals. Carmakers and their suppliers are industrial businesses that use copious amounts of energy, and prices in the UK are among the highest in Europe.

According to Prof David Bailey of Birmingham Business School, "electricity is a fundamental input into modern industrial production".

"If producing a car in Britain is structurally more expensive because the energy required to manufacture it is substantially more expensive, Britain is effectively imposing a competitiveness tax on its own industry."

All of these challenges have come at a time when JLR has been ploughing money into the development of a new generation of electric vehicles. The first fruits of the £15bn programme were seen last week, with the official unveiling of the first electric Range Rover.

That was relatively uncontroversial – but so far the relaunch of Jaguar as an all-electric brand has been anything but. In late 2024 the company drove straight into the heart of the culture wars with a polarising advertising campaign that some saw as excessively "woke". The first actual car is due to make its public bow on 6 October – and it will be a pivotal moment for the company.

It is easy to see why JLR's chief executive PJ Balaji feels action is necessary to trim costs and make the company leaner. That is bad news for employees, with thousands of jobs to go and compulsory redundancies not being ruled out.

But the carmaker's network of suppliers are also being squeezed.

"JLR has been pushing hard for cost savings", one leading supplier told the BBC. "But those suppliers are also facing high energy costs and high employment costs…there's huge anxiety right now."