Tata Motors will be forced to suspend production at some or all of its plants if it is unable to secure supplies of important parts of China, even when faced with a shortage of semiconductors. In addition, the car company is also seeing a “temporary” drop in demand.
“If we are unable to secure the supply of critical parts from China for production, we may be forced to suspend production in some or all of our plants, which will have a significant negative impact on our cash flow in the future. We are witnessing certain supply chain disruptions as a result of the blockade of China and the closure of dealers, which is likely to lead to negative EBIT and negative free cash flows in the first quarter of fiscal year 23 for Jaguar Land Rover, while our local business is also likely will have a negative impact on financial results, ”said Tata Motors in its annual report for fiscal year 22.
The recent blockades in parts of China, as the government pursues a strategy to limit the spread of Covid-19, have had an adverse effect on its supply chains, as suppliers are unable to produce or supply products. These blockages also led to the temporary closure of some dealers in some regions of China, which would also have an “adverse effect” on its sales prospects for fiscal year 23.
“In the same way, we are also witnessing a temporary drop in demand,” he added.
There is also “significant uncertainty” about such disruptions in business, as continued cross-border restrictions could adversely affect supply chains worldwide.
The company also said it is facing a shortage of semiconductors, which are crucial to its products. The shortage of semiconductors has affected and continues to affect the company’s production schedules and its ability to meet the demand for some of its vehicles.
We, like other carmakers, have experienced some supply chain disruptions due to the Covid-19 pandemic, including the current global semiconductor shortage, which has affected our production schedules and ability to meet global demand for some of our vehicles. As a result, we have adjusted the production schedules for certain vehicles and in certain manufacturing companies, “it said.
“Such a shortage, which affects the entire automotive industry, can affect us more than our competitors, as they may have a higher level of purchasing power from suppliers or have a different set of features for their vehicles.”
The shortage of semiconductors can also raise car prices, which could negatively affect customer demand in the future if other companies manage to increase supply. In addition, extended delivery times for new cars could lead to increased cancellations by customers, it said.
“There can be no guarantee that we will be able to provide alternative semiconductor supplies or that such alternative semiconductor supplies will be readily available. The shortage of semiconductors is and is likely to continue to affect us in the near future, “he said, adding that the extent and impact of changes in” consumer preferences and behavior are unknown and unpredictable “at the moment.
Although operations have resumed at its production facilities, he fears that production rates and deadlines may be affected, while declining consumer confidence or changes in behavior, such as working from home, could affect demand in global transport and car Industry.