JLR retail sales up 68% in Apr-Jun; expects chip shortage to worsen in Sept quarter

Jaguar Land Rover (JLR), owned by Tata Motors, on Tuesday reported a 68.1 per cent increase in its retail sales at 1,24,537 units in April-June quarter, and warned that the global chip supply shortage is likely to worsen in the September quarter.
 
JLR said its retail sales were higher year-on-year in every key region including in the UK (186.9 per cent), Europe (124 per cent), overseas (71 per cent), North America (50.5 per cent) and China (14 per cent).
 
Higher retail sales reflect the continuing recovery in demand from the COVID-19 pandemic, particularly compared to a year ago, the company said. Sales in the year-ago quarter were hit by the outbreak of the pandemic and the resultant lockdowns across the world.
 
The carmaker, however, said that wholesales were lower in April-June than demand would have permitted due to semiconductor supply issues affecting the global auto industry.
 
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While wholesales at 84,442 units in the quarter were up 72.6 per cent year-on-year, they were about 30,000 units lower than otherwise would have been planned as a result of semiconductor supply constraints and the impacts of COVID-19, JLR said in a release.
 
On the issue of chip shortage, JLR said the situation is dynamic and difficult to forecast. "Based on recent input from suppliers, we now expect chip supply shortages in the second quarter ended 30 September 2021 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. We expect the situation will start to improve in the second half of our financial year," it said.
 
However, the broader underlying structural capacity issues will only be resolved as supplier investment in new capacities comes online over the next 12-18 months, the company said, adding that it expects some level of shortages to continue through to the end of the year and beyond.  
 
"While the present supply constraints continue, the company will continue to prioritise production of higher margin vehicles for the chip supply available as well as make chip and product specification changes where possible to reduce the impact," it said.
 
The shares of Tata Motors plunged following the announcement, hitting the 10 per cent lower circuit. However, it recouped some of the losses to close 8.41 per cent lower at Rs 316.95 on the BSE on Tuesday.

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Due to the chip supply shortage, the company is expecting "an operating cash outflow of about £1 billion with a negative EBIT margin in the second quarter and a substantial improvement in underlying operating cashflow in the second half of the financial year as chip supply improves".
 
While the semiconductor supply issues represent a significant near-term challenge for the industry which will take time to work through, the company is encouraged by the strong demand it sees for when supply recovers, JLR CEO Thierry Bollore said.
 
The company presently has about 1,10,000 global retail orders, the highest in its history, representing three months of sales cover, with five months in Europe and four months in the UK, the release said.
 
"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," Bollore said.
 
JLR said the total liquidity at the end of the first quarter was at £5.6 billion, including a £1.9 billion undrawn committed credit facility (RCF).

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