Explained: Why Tata Motors shares fell over 8% – Times of India

New Delhi: Shares of Tata Motors There was a huge fall on Tuesday as it wiped out all early gains and closed with a fall of over 8 per cent on the BSE.
The stock made a positive start and rose nearly 3.5 per cent to Rs 358.10 during the day. However, a massive sell-off emerged after it was owned by Tata Motors. Jaguar Land Rover (JLR) warned of windfall gains due to global chip shortages.
This profit warning shook the company’s investors and its shares fell 9.99 per cent to the day’s low of Rs 311.45 on the BSE.
On the NSE, the stock closed at Rs 316.90, down 8.43 per cent, erasing the initial gains.
‘Industry affected by semiconductor shortage’
In an official release to exchanges, JLR said that its wholesales were particularly short of demand due to semiconductor supply issues affecting the global auto industry.
JLR’s Chief Executive Officer (CEO) Thierry Bollor said: “The current semi-conductor supply issues represent a significant near-term challenge for the industry, which will take time to work through, but when supplies recover. So we are encouraged by the strong demand that we see. We are taking strong steps to ensure the security of our supply chain for the future, to increase visibility and control over chip supply for our vehicles directly to our suppliers. And working with chip makers.”
Looking ahead, chip shortages are very dynamic and difficult to predict, the company said.
‘Expect £1bn cash outflow in Q2’
JLR expects cash outflows of around £1 billion with negative earnings before interest and taxes (EBIT) margins for the quarter ended 30 June.
It also estimates the chip supply shortfall in the second quarter ended September 30, 2021, to be higher than in the first quarter.
This could result in wholesale sales being around 50 percent below their planned levels.
“We expect the situation to start improving in the second half of our fiscal year. However, broader
The underlying structural capacity issues will only be resolved as supplier investment in new capacities comes online over the next 12-18 months and so we expect some level of shortfall to continue through the end of the year and beyond.” the carmaker said.
However, JLR says it will continue to prioritize the production of high-margin vehicles to account for the available chip supply and make changes where possible to reduce the impact.
Automakers raise concerns over global chip shortage
JLR is not the first carmaker to express concern over global chip shortages that are affecting production.
A few days ago, BMW termed the chip shortage situation as “serious” and warned that it could lead to further production losses.
The carmaker said it showed no signs of decelerating and that supplies would remain tight in the second half of the year.
BMW board member in charge of production Milan Nedeljkovic said production was being halted at various sites, either on a daily basis or in individual shifts, with production lost so far this year being around 30,000 “units”.
The global shortage of computer chips has forced most automakers to cut production.
Volkswagen Chief Executive and President Scott Keogh expects the vehicle pipeline to remain tight in July and August, but should open up in the fall.
There were also some reports that said Ford Motor Company would close several of its North American factories for a few weeks in July and August due to semiconductor shortages.
Michigan-based company Dearborn said in April that the supply crunch would cost $2.5 billion this year and cut vehicle production in half in the second quarter.
(with inputs from agencies)


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