Losses widen at Tata Motors on chip shortages, rising expenses

There are significant challenges on the supply side, including semi-conductor issues and sharp commodity inflation

Homegrown auto major Tata Motors Ltd (TML) on Monday reported a widening of consolidated net loss to Rs 4,415.54 crore for the second quarter ended September 30, due to higher expenses and lower sales of its British arm JLR following semiconductor shortage.

The company had posted a consolidated net loss of Rs 307.26 crore in the same period last fiscal, Tata Motors said in a regulatory filing.

Its consolidated revenue from operations stood at Rs 61,378.82 crore against Rs 53,530 crore in the year-ago quarter, it added.

The total expenses were Rs 65,712.83 crore, compared to Rs 54,982.77 crore a year ago.

Jaguar Land Rover (JLR) had a revenue of 3.9 billion pounds with a pre-tax loss of 302 million pounds in the second quarter, the company said.

JLR wholesales in the quarter were 64,032 units, down 12.8 per cent from the year-ago quarter, and retail sales, including the China joint venture, stood at 92,710 units, down 18.4 per cent, reflecting the semiconductor shortage and lower retailer inventories, it added.

Commenting on the performance, JLR CEO Thierry Bollore said, "The global semiconductor shortage remains challenging, but I am pleased to see the actions we have been implementing reduce the impact".

With strong customer demand and a record order book, he said, "We are well placed to return to strong financial performance as semiconductor supply begins to improve".

The company said JLR is taking measures to increase future visibility and control over semiconductor supply for its vehicles and is working closely with semiconductor and Tier One suppliers.

"As a result, JLR expects the EBIT margin and free cash flow (before restructuring costs) to turn positive in the second half of fiscal 2022," it added.

On a standalone basis, TML posted a net loss of Rs 659.33 crore. It had a net loss of Rs 1,212.45 crore in the same quarter last fiscal.

Standalone revenue from operations was Rs 10,996.02 crore, compared to Rs 5,594.60 crore a year ago, the company said.

In Q2 FY22, wholesales, including exports, increased 56.3 per cent to 1,71,823 units, it noted.

Tata Motors Executive Director Girish Wagh said during the quarter, the company accelerated sales momentum to increase market share in every segment of commercial vehicles, recorded a decade high sale in passenger vehicles and delivered the highest ever quarterly sales in electric vehicles.

"Looking ahead, we expect the demand for commercial, passenger and electric vehicles to remain strong even as concerns about the supply of semiconductors and high input costs continue.

“We are taking definitive actions in the near term to mitigate these effects through an agile, multi-pronged approach to address supply bottlenecks and drive our savings programme harder," he added. Addressing reporters in a conference call, Tata

Motors Group CFO PB Balaji said, "As far as the quarter that ended September 30 is concerned, as expected it was a challenging quarter. This witnessed a significant improvement in our India operations and as far as JLR was concerned, there were semiconductor issues that impacted the performance of JLR".

The overall performance of the business was a tale of two halves between JLR and Tata Motors, he added.

JLR's sales in Q2 were broadly in line with the guidance given earlier, "a significantly lower number because of the semiconductor issues that we had called out earlier".

Asserting that there is no demand issue, he said, "The company continues to see a strong demand for its products and the global order book now stands 1,25,000".

On a standalone basis of Tata Motors, Balaji said, "We saw a strong recovery amidst supply and commodity inflation challenges".

He said as a result of the transition to BS-VI and increase in the cost of commodities, between March last year (pre-BS-VI) and today the price of a commercial vehicle has gone up by almost 25 per cent and while that of a passenger vehicle has gone up by 15 per cent. The inability of the company to fully pass it on to consumers has affected the company's margins.

In October, he said Tata Motors has already taken a price hike in the CV segment being the market leader.

However, in the PV segment, he said, the company doesn't lead the market.

When asked about reports of Tata Motors looking to Ford's factory in Tamil Nadu, Balaji declined to comment on "market rumours" but said the company has enough capacity at present, with 40,000 units a month to meet the current demand.

On the outlook, Balaji said, "We see demand remaining strong for JLR and India PV (passenger vehicles business). And while CV is starting to improve gradually, the semiconductor issues and the commodity inflation challenges are likely to continue, and we are doing our best to manage the same".

The company said, "The performance is expected to improve gradually starting in H2, as both the supply chain and the pandemic situation improves".

On the non-appointment of Managing Director after the retirement of Guenter Butschek earlier this year, Balaj said its a decision that the company's board will decide at an appropriate time but at the moment, JLR, the CV business and PV business of Tata Motors have been running independently under respective leaders and coming together whenever needed.

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