Tata motors shared sales volume data for JLR in Q1 along with a commentary on the present demand and supply situation. JLR retail sales in Q1 was up 68.1% YoY at 124,537 vehicles and Wholesales (excluding the China JV) was up 72.6% YoY at 84,442 units. However, this was about 30,000 units lower than otherwise would have been planned as a result of semiconductor supply constraints and the impacts of Covid-19.

The company expects chip supply shortages in Q2 to be greater than in theQ1, potentially resulting in wholesale volumes about 50% lower than planned. However, as per the company, the broader underlying structural capacity issues will only be resolved as supplier investment in new capacities comes online over the next 12-18 months and so they expect some level of shortages will continue through to the end of the year and beyond

At the end of Q1, the company had about £3.7 billion of cash and short-term investments. Given the supply constraints, the company expects an operating cash outflow of about £1 billion with a negative EBIT margin in the second quarter. From 2.6% EBIT Margin in FY21 and 7.5% EBIT Margins in Q4FY21, expecting a decline in Q2 did hit the market sentiment for the company.

Going forward the company is hopeful of a substantial improvement in underlying operating cash flow in the second half of the financial year as chip supply improves. Encouragingly, the Company continues to see strong demand for its products when semiconductor supply ultimately improves.

The stock closed with an 8.5% of decline at Rs.316.6.