Jaguar Land Rover retail sales climb 68% (yoy) in Q1 FY22

To prioritise production of higher margin vehicles due to chip supply constraints

Jaguar Land Rover retail sales for the three-month period to 30 June 2021 were significantly up year-on-year, reflecting the continuing recovery in demand from the Covid 19 pandemic, particularly compared to a year ago. However, wholesales in particular were lower than demand would have permitted due to semiconductor supply issues affecting the global auto industry.

Retail sales for the first quarter ending 30 June 2021 were 124,537 vehicles, 68.1% higher than the 74,067 vehicles sold in Q1 last year. Retails were higher year-on-year in every key region including in the UK (+186.9%), Europe (+124.0%), Overseas (+71.0%), North America (+50.5%) and China (+14.0%).

 

Retail sales of all models, other than Jaguar XE, were higher year-on-year and sales of the new Land Rover Defender continued to climb with 17,194 vehicles retailed in the first quarter.

Wholesales were 84,442 units in the quarter (excluding the China JV), up 72.6% year-on-year. However, this was about 30,000 units lower (c. 27%) than otherwise would have been planned as a result of semiconductor supply constraints and the impacts of Covid-19, although this reduction had been broadly anticipated.

At the end of July, Jaguar Land Rover will report interim unaudited results for the three months ended 30 June 2021. At the end of the period, the company had about 3.7 billion of cash and short-term investments (unaudited). Based on this and broadly in line with expectations given the supply constraints, the company expects to report a cash outflow of about 1 billion with a negative EBIT margin for the quarter. Total liquidity at the end of the first quarter was over 5.6 billion including a 1.9 billion undrawn committed credit facility (RCF).

Looking ahead, the chip shortage is presently very dynamic and difficult to forecast. Based on recent input from suppliers, we now expect chip supply shortages in the second quarter ended 30 September 2021 to be greater than in the first quarter, potentially resulting in wholesale volumes about 50% lower than planned, although we are continuing to work to mitigate this. We expect the situation will start to improve in the second half of our financial year. However, 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 we expect some level of shortages will continue through to the end of the year and beyond. While the present supply constraints continue, the Company will continue to prioritise production of higher margin vehicles for the chip supply available as well as make chip and product specification changes where possible to reduce the impact.

In the scenario above, we expect an operating cash outflow of about 1 billion with a negative EBIT margin in the second quarter and a substantial improvement in underlying operating cashflow 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 Company presently has about 110,000 global retail orders, the highest in the history of the company, representing 3 months of sales cover, with 5 months in Europe and 4 months in the UK. Orders for the Defender alone total over 29,000, representing over 4 months cover.

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