Jaguar Land Rover downgrades forecast as global chip shortage bites

Jaguar Land Rover has lowered its forecast for deliveries to car dealers as the global chip shortage has hit the luxury motor manufacturer more than it expected.

The company said on Tuesday that chip shortages would be worse than anticipated in the second quarter of its financial year, but that the situation would improve in the second half.

“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,” the carmaker said in a statement on Tuesday.

Shares in Tata Motors, JLR’s Indian parent company, fell 9 per cent after the announcement.

Wholesale volumes, excluding a Chinese joint venture, came to 84,442 units in the first quarter of the financial year, about 27 per cent lower than planned because of the semiconductor supply constraints and the impact of the coronavirus pandemic. The company said that “this reduction had been broadly anticipated”.

Sales nonetheless climbed 72.6 per cent from same period a year earlier, the group said. JLR’s retail sales for the quarter to June 30 were “significantly” up from the previous year, JLR said on Tuesday, “reflecting the continuing recovery in demand from the Covid-19 pandemic”.

“While the present semiconductor supply shortages continue to be a challenge for the industry, we are encouraged by the strong demand we see for our vehicles,” said chief executive Thierry Bolloré in a statement on Tuesday.

“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 and so we expect some level of shortages will continue through to the end of the year and beyond,” he added.

The carmaker plans to overhaul its supply chain and negotiate directly with chip manufacturers in an effort to avoid a repeat of factory shutdowns caused by the semiconductor crisis that have plagued the business this year.

Bolloré told the Financial Times last month that the carmaker would take closer control of essential parts such as microprocessors and electric batteries.

Carmakers, which have long outsourced a lot of production to suppliers, have been redrawing their supply networks since the chip shortage crisis cost the industry millions of lost vehicle sales.

“It is a real storm, and I do not believe really that it’s going to improve in a few months, I believe it could last for much longer than that,” Bolloré told the Financial Times.