Tata Motors shares tank as JLR warns of worsening impact of chip shortage

Ayushi Kar Mumbai | Updated on July 07, 2021

The present semiconductor supply issues represent a significant near-term challenge for the industry   -  REUTERS

Wholesale volumes seen down 50% in Q2

Tata Motors subsidiary Jaguar Land Rover (JLR) on Tuesday said that chip supply shortage will pull down its wholesale volumes by 50 per cent during the second quarter ending September 30.

‘Difficult to forecast’

“The chip shortage is presently very dynamic and difficult to forecast. Based on recent input from suppliers, we expect chip supply shortages in the second quarter ending September 30 to be greater than in the first quarter, potentially resulting in wholesale volumes about 50 per cent lower than planned, although we are continuing to work to mitigate this,” JLR said in a press release.

Tata Motors’ stock tanked by over 10 per cent intra-day on the BSE to close at ₹316 a piece, down 8.4 per cent from the previous close.

Jaguar Land Rover retail sales for the three-month period to June 30 were significantly up year-on-year, reflecting the continuing recovery in demand. However, wholesales, in particular, were lower than demand would have permitted due to semiconductor supply issues affecting the global auto industry.

Thierry Bolloré, Jaguar Land Rover Chief Executive Officer, said: “The present semiconductor supply issues represent a significant near-term challenge for the industry which will take time to work through but we are encouraged by the strong demand we see for when supply recovers. We are taking strong steps to ensure the security of our supply chain for the future, working with our suppliers and chip manufacturers directly to increase the visibility and control over the chip supply for our vehicles.”

Retail sales

Retail sales for the first quarter were 69 per cent higher than vehicles sold in Q1 last year, increasing from 74,067 sold in Q1last year to 1,24,537 vehicles sold in the first quarter for 2022 fiscal. Retails were higher year on year in every key region, including the UK, which saw an increase of 187 per cent. Europe overall saw an increase of 124 per cent, overseas sales increased by 71 per cent, sales in North America increased by 50 per cent and retail sales in China increased by 14 per cent.

While wholesales were up 72 per cent year on year, this was still 30,000 lower than otherwise planned due to semiconductor supply constraints and the impact of Covid.

Improvement likely in Q2

According to JLR, the situation could start improving in the second half of the financial year.

However, broad underlying structural capacity issues will only be resolved as supplier investment in new capacities come online in the next 12-18 months. So supply shortages are expected next year and beyond.

Published on July 06, 2021

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