Tata Motors-owned luxury car brand Jaguar Land Rover (JLR) expects chip supply shortages in Q2FY22 to be greater than in Q1, potentially resulting in wholesale volumes about 50% lower than planned.
Looking ahead, the chip shortage is presently very dynamic and challenging to forecast. However, the situation will start to improve in Q2FY22, the company said.
Thierry Bollore, CEO, JLR, said the present semiconductor supply issues represent a significant near-term challenge for the industry which will take time to work through but, the company is encouraged by the strong demand it sees 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.”
The broader underlying structural capacity issues will only be resolved as supplier investment in new capacities comes online over the next 12-18 months. Therefore, the company expects some level of shortages will continue through to the end of the year and beyond.
The company also said that it will continue to prioritise production of higher-margin vehicles for the available chip supply and make chip and product specification changes where possible to reduce the impact.
Based on supply shortage, the company expects an operating cash outflow of about £1 billion with a negative EBIT margin in Q2 and a substantial improvement in underlying operational cash flow in H2FY22 as chip supply improves.
However, the company continues to see strong demand for its products when the semiconductor supply ultimately improves.
JLR presently has about 110,000 global retail orders, the highest in the company’s history, representing three months of sales cover, with five months in Europe and four months in the UK. Orders for the Defender alone total over 29,000, representing over four months cover.
In terms of the retail sales for Q1, the company sold 124,537 units, 68.1% higher than the 74,067 units sold in Q1 last year. Retails were higher y-o-y in every key region, including in the UK, Europe, Overseas, North America and China.
Retail sales of all models, other than Jaguar XE, were higher year-on-year and sales of the new Land Rover Defender continued to climb with 17,194 units retailed in Q1.
Wholesales were 84,442 units in the quarter (excluding the China JV), up 72.6% year-on-year. However, this was about 30,000 units lower than otherwise would have been planned due to semiconductor supply constraints and the impacts of COVID-19, although this reduction had been broadly anticipated.