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Tata Motors Q1 results: Company says supply chain constraints, commodity price inflation remain top concerns

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Tata Motors said that the capacity shortage for semi-conductor production was structural and the company is expecting the supply stress to continue into the second quarter

Tata Motors Q1 results: Company says supply chain constraints, commodity price inflation remain top concerns
Tata Motors reported a wider-than-expected net loss of Rs 4451 for the June quarter on the back of a severe shortfall in planned production output for its UK-based subsidiary Jaguar Land Rover (JLR).
The losses are explained by the profit warning issued by JLR on July 6, flagging a negative EBIT for both Q1 and Q2 of the ongoing fiscal due to supply chain constraints. The automaker on Monday reported free cash outflows of £996 million, an improvement over the £1570 million outflow during the same period last year, but severely constrained by semi-conductor supplies this quarter.
JLR production was short by 30,000 units as a result of these shortages, even as the company reported a record-high order bank of 110,000 units as of June 30th.
Tata Motors said that the capacity shortage for semi-conductor production was structural and the company is expecting the supply stress to continue into the second quarter, even though the situation has improved marginally from June-end.
“Steep commodity price inflation and pandemic-led supply chain uncertainties remain Tata Motors' top concerns,” PB Balaji, Group CFO, Tata Motors said, adding that while retail sales for JLR improved in all geographies, recovery in Tata Motors' domestic business was impacted by the second wave of COVID-19 and related lockdowns across the country.
However, the standalone business saw limited impact due to the global semi-conductor shortage which impacted JLR volumes by 50 percent.
"The impact of semi-conductor shortage was not very significant for the domestic business," Balaji told reporters in an earnings conference call, adding, "That's why we intend to pick up on our demand from Q2 itself."
Balaji also shared that the National Company Law Tribunal or the NCLT is likely to pronounce its final order on the matter of subsidiarisation of Tata Motors' domestic passenger vehicle business in a few weeks.
Price hike
Balaji said that Tata Motors has already announced its first round of price hikes to offset high input costs for its range of commercial vehicles in its capacity as the market leader for CVs in India, however, it will wait to take a cue from the market leader in passenger vehicles, which happens to be Maruti Suzuki, before declaring price hikes for its passenger car portfolio.
For the first time in 9 years, Tata Motors has managed to grow its PV market share to 10 percent, Balaji said.
"We expected some softening in commodity prices going forward, which has not happened", Balaji said, indicating that further price hikes may be on the cards.