(Bloomberg) — Jaguar Land Rover is working seven days a week trying to limit the damage from the chip shortage that dragged its owner into the red last quarter and is about to cost it even more.
The British luxury-car maker has set up a “full-time mission control center” to manage the issue, Chief Financial Officer Adrian Mardell said on a call Monday. Parent Tata Motors Ltd. posted a net loss of 44.5 billion rupees ($598 million) for the quarter ended in June, a bigger deficit than any analyst estimate compiled by Bloomberg.
The supply chain issues derailed a short-lived run of positive earnings for Tata Motors. In addition to the dearth of semiconductors, results last quarter were plagued by commodity price inflation: raw material costs almost quadrupled from a year ago to 373.1 billion rupees.
“We’re expecting the worst of chip crisis to come in the second quarter,” P.B. Balaji, Tata Motors’s chief financial officer, told reporters during an earlier briefing. “We’re working very strenuously to mitigate the impact,” he said, by reducing consumption where possible, redesigning products and making long-term arrangements with semiconductor suppliers.
JLR reported a pretax loss of 110 million pounds ($152 million) last quarter on revenue of 4.97 billion pounds. This quarter, the company expects a negative pretax earnings margin and free cash outflow of less than 1 billion pounds. It’s anticipating the semiconductor situation will start to improve in the second half of its financial year.
JLR’s performance is crucial for Mumbai-based conglomerate Tata Group, after a devastating wave of Covid infections and government-imposed lockdowns crimped demand in its home market. The unit is staging board-level reviews of the chip issue twice a week.
Supplier Blame
One of JLR’s suppliers of critical parts was “by far the biggest component” of shortages last quarter, Mardell said on the call. He didn’t identify the company but did say the dispute could lead to litigation.
“It would be very sad if this actually went to the point of a legal action, of course, but we expect an equal entitlement and we don’t feel that in the first quarter we received that,” Mardell said. “Those are the discussions were having with them.”
Demand for JLR is extremely strong, with an order book of about 110,000 units, Tata’s Balaji said. The division expects to wholesale about 65,000 vehicles this quarter, reiterating that this is about half of its earlier plan. The chip crisis has forced the carmaker to idle production at several plants.
Under CEO Thierry Bollore, the former Renault SA chief who joined the U.K. carmaker in September, Jaguar Land Rover is planning to electrify its lineup, ditching combustion engines at the smaller of its two brands completely in four years. The Land Rover line will get its first fully electric model in 2024, and by the following year, all Jaguars will be entirely powered by batteries.
Tata Motors shares closed 0.8% lower in Monday trading before the earnings were released. The stock is up almost 60% this year.
(Updates with JLR CFO’s comments in headline and throughout.)
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