Jaguar Land Rover, the luxury car brand controlled by Tata Motors, expects semiconductor supply shortages to persist for several years, causing uncertainty about production-related links, although the two British brands have taken measures internally.
Taken together, both brands failed to surpass combined wholesale sales for the same period last year in the first half of this fiscal year. JLR’s wholesale sales for the first half of FY23 totaled 147,122 units, down nearly 1% from 148,474 units sold in the same period last year.
Also read: Jaguar Land Rover urges suppliers to align with company’s 2030 sustainability goals
Jaguar Land Rover chief executive officer Thierry Bollore said in a post-earnings call with analysts that the company recently signed new chip sourcing agreements. There was also positive news on chip availability, but he also warned that shortages are not going to ease anytime soon.
“We should also not forget that the chip supply crisis will continue. I gather from my conversations with all CEOs in the industry that this problem will continue for years to come and it’s not a matter of months or quarters. It will take years for the situation to return to normal,” Bollore said.
JLR works directly with chip suppliers and enters into partnership agreements to improve short-term visibility of the offering and support future product programs. Agreements have been signed with several of the major chip suppliers and further agreements are in the pipeline.
“We are almost finalizing our long-term chip supply agreements. But it’s quite clear that if you miss one, it’s enough to create a problem that we had in September. The last such agreement we signed will come into effect in fiscal 2023, which means we are seeing very positive signs, but the full impact of these agreements will gradually be seen across the global supply base and our Tier 1.” added Bollore.
Also Read: Jaguar Land Rover aims to be zero emissions across its operations by 2039
One of JLR’s suppliers failed to meet production commitments, resulting in less than expected improvement in September volumes. It had to resort to further prioritizing production on top-margin products such as Range Rover and Range Rover Sport.
JLR is targeting a 9% increase in volumes to 160,000 units in the second half (H2FY23) to meet the claimed backlog of 205,000 units.
Adrian Mardell, Jaguar Land Rover’s Chief Financial Officer, said: “We’re more confident of deliveries going into January than we were in October. We were counting on 160,000 units (production) in the second half. Our (model) mix will improve. Q3 total units will be marginally better, but ASP and average sales per unit will rise sharply.”
“Range Rover and Range Rover Sport refresher production increased to 2,400 units per week versus 6,000 wholesale units in Q1 FY23 and therefore the mix will continue to improve from Q3 FY23 on the back of a new chip supply deal is completed. We believe that JLR is likely to return to 12% margin levels,” said a report by ICICI Securities.