As the severity of chip shortage deepens Tata Motors-owned Jaguar Land Rover is working with its engineers to see if changes to product features can be made as a stopgap measure against the semiconductor shortage.
The two British luxury automotive brands expect a production loss of nearly 100,000 units in the first half of this year (April to September) due to the chip shortage. Supplies of the crucial component are not expected to revive at least for the next 3-4 months.
In a conference call, Adrian Mardell, chief financial officer, Jaguar Land Rover said, “We are making chip and product specification changes wherever possible. So, we are looking to change the features on vehicles. We are asking engineers to use simple reconfigurations for the chips. Obviously, we will test it and if does work we will introduce them.”
Due to the shortage JLR is forced to give priority to production of high margin models even as efforts are on to source the chips from companies that are not the regular suppliers of JLR. The supply of chips from Japan and North America are predicted to improve in the upcoming months while new capacity created will come on board after 12 months.
“We will do everything possible to mitigate the impact including prioritising production of higher-margin vehicles for the chip supply available while making chip and product specification changes wherever possible,” Mardell added.
JLR has an order backlog of 110000 units, a significant portion of it coming from the new Defender. Mardell warned that JLR may need to reposition transactions if the chip shortage continues for a longer duration. “We have 110,000 orders that were grown by 1,000-2,000 a week, we have slowed down the growth of that because we may need to reposition the value transaction if this continues for too long,” Mardell added.
JLR’s total inventory number by end of June was about 74,000 units and the production levels for Q2 is going to be somewhere between 55,000-60,000 units.
JLR on July 6 warned of a 50 percent reduction in wholesale volumes during the July-September (Q2) quarter. The revised guidance for Q2 is wholesales of 60,000-65,000 units, down from 120,000 units predicted in May.
“We are working with our suppliers and our chip manufacturers. We are working with the source to directly increase the visibility and increase chip supply for our vehicles. Ultimately the 50 percent impact in Q2 is a function of overall capacity in Q2 combined with some specific supplier issues such as the fire in Japan,” Mardell added.
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