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JLR 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 © Bloomberg

Jaguar Land Rover halved sales expectations after warning the impact of the global chip shortage is significantly worse than expected.

Indian-listed shares in the luxury carmaker’s parent company Tata Motors fell 9 per cent after warning the second quarter of the financial year to the end of September will be hit harder than the first quarter.

Like many of the world’s carmakers, JLR halted some production because of shortages, but predicted a recovery later this year.

“We now expect chip supply shortages in the second quarter ended September 30 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.

It now expects a recovery between September this year and March 2022.

The British carmaker becomes the latest auto group to cut production further, after Ford announced further downtime at its US plants, and carmakers from General Motors to Volkswagen weather months of disruption.

JLR said 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 pandemic’s impact. The company said that “this reduction had been broadly anticipated”.

Sales, nonetheless, climbed 72.6 per cent from the same period a year earlier, the group said. JLR’s retail sales for the first quarter ending on June 30 were “significantly” up from the previous year, it added, “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.

“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.”

JLR 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 company 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 said.

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