According to foreign media reports, Jaguar Land Rover’s chief financial officer Richard Molyneux told investors that the company’s main supplier Novelis plant was disrupted by flooding, which triggered a shortage of aluminum, which is the biggest obstacle the company is facing at present.Molyneux said the shortage of the key material will “limit the company’s production for the rest of this quarter and next quarter”. Molyneux said the shortage of key materials would “limit the company’s production for the remainder of the quarter and into the next quarter”. Flooding caused by torrential rains in July led to a temporary shutdown of Novelis’ plant in Sierre, Switzerland, while two plants belonging to Constellium, another aluminum supplier, were also forced to close temporarily. Jaguar Land Rover and several other automakers are customers of Novelis and Constellium. Jaguar Land Rover declined to disclose the specific number of production cuts.
Jaguar Land Rover uses aluminum in its Range Rover and Range Rover Sport SUVs, as well as other key models. According to the company’s 2020 financials, Jaguar Land Rover uses about 180,000 tons of aluminum annually. The company is working to minimize the impact of production cuts due to aluminum shortages. From April 1 to June 30 this year, Jaguar Land Rover’s pre-tax profit jumped 59% year-on-year to 693 million pounds ($883 million); revenue rose 5.4% year-on-year to 7.3 billion pounds, the highest quarterly revenue in Jaguar Land Rover’s history; and its EBITDA margin reached 8.9%, up 0.3 percentage points year-on-year.
On August 2, Molyneux said on Jaguar Land Rover’s latest quarterly earnings call, “We will do everything we can to ensure that the aluminum shortage does not impede the achievement of this year’s EBIT target. Our industry operations team is very good at finding alternative sources and we are also leveraging the Tata Group (Tata) ecosystem for help.”
Last month, Porsche also lowered its sales and profit forecasts due to aluminum alloy shortages. Porsche said the aluminum supply issue was affecting production of all its models and could lead to a temporary shutdown of one or more model lines. Porsche did not disclose the names of suppliers affected by the flooding at the time. Kenlink Aluminum said it did not supply Porsche through its plant in Switzerland. In addition to Jaguar Land Rover and Porsche, BMW, Mercedes-Benz and Audi have also been affected by the aluminum shortage but have found alternative sources.Bernstein analysts said the Porsche shutdown could lead to a reduction in production of up to 17,400 vehicles in the second half of the year, which is equivalent to more than 11 percent of Porsche’s deliveries for the first half of the year.
High-end automakers are among the biggest auto consumers of aluminum, which costs more than steel but weighs less. Unlike affordable brands, premium carmakers can afford the increased material costs by selling their cars at higher prices.