Tata Motors Drops 10% As JLR Warns Of “Greater” Chip Shortages

After gaining in the morning session, Tata Motors share price declined more than 6 percent in the last hour of trade on July 6 as the company flagged chip supply shortage.

Tata Motors, the parent company of luxury carmaker Jaguar Land Rover, saw its stock plummet 10% to an intraday low of 311.45 on the Bombay Stock Exchange after the company warned of a negative operating profit margin or EBIT margin in the second quarter of the current financial year due to chip supply shortages expected to be worse than in the first.

“Based on recent input from suppliers, 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, although we are continuing to work to mitigate this,” Jaguar Land Rover said in a press release.

We expect some level of shortages to persist through the end of the year and beyond, as the underlying structural capacity issues are only resolved as supplier investment in new capacities comes online over the next 12-18 months.

While current supply constraints persist, the company will continue to prioritise production of higher-margin vehicles for the remaining chip supply, as well as make chip and product specification changes where possible to mitigate the impact, according to the company.

June Quarter Updates:

Jaguar Land Rover retail sales increased significantly YoY for the three months ending June 30, 2021, reflecting the ongoing recovery in demand following the Covid 19 pandemic, especially when compared to a year ago.

Retail sales in the first quarter of 2021 totaled 124,537 vehicles, up 68.1 percent from the 74,067 vehicles sold in the same quarter last year. Retail sales were up YoY in every key region, including the UK (+186.9%), Europe (+124.0%), Overseas (+71.0%), North America (+50.5%), and China (+14.0%), according to the company.

The stock was trading at Rs 311.45, down Rs 34.60, or 10.00 percent. It has touched an intraday high of Rs 358.10 and an intraday low of Rs 311.45.

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