The biggest hurdle for Jaguar Land Rover is a looming shortage of aluminum after production at a plant owned by top supplier Novelis was hit by flooding, its chief financial officer Richard Molyneux told investors.
Shortages of the essential material “will constrain our production for the remainder of this quarter and into the next,” Molyneux said.
Flooding caused by heavy rains in July halted production at Novelis’s plant in Sierre, Switzerland, and closed two plants owned by another aluminum supplier, Constellium. Both Novelis and Constellium list JLR as a customer, along with several other auto companies.
“We will do our utmost to ensure that this does not prevent us from achieving our EBIT targets for the year,” Molyneux said Aug. 2 during JLR’s earnings call for the quarter ended June 30.
“Our industrial operations team is very good at finding alternative sources and we are also leveraging the Tata ecosystem to help us,” Molyneux said.
Jaguar Land Rover’s Range Rover and Range Rover Sport utility vehicles and other major models use the metal. JLR uses about 180,000 metric tons of aluminum annually, based on the company’s 2020 financial figures.
Last month, Porsche cut its sales and profitability outlook due to a shortage of aluminum alloy. Supply problems have affected production of all its models and could lead to the shutdown of one or more vehicle series, Porsche said.
Porsche did not name the affected supplier. Constellium said it did not supply Porsche from its Swiss facility.
BMW, Mercedes-Benz and Audi were also affected by the shortage of aluminum alloys, but managed to find alternative sources.
Premium automakers are among the largest automotive consumers of aluminum, which costs more than steel but is lighter. Unlike volume brands, they can absorb the additional costs because they sell their cars for higher prices.
Analysts at Bernstein said the disruption at Porsche could lead to a production loss of up to 17,400 vehicles in the second half. That figure is equivalent to more than 11 percent of Porsche’s first-half deliveries.
JLR declined to provide a figure for the reduced production volume.
The company said it was trying to minimize the impact on its recent record string of quarterly profits.
JLR’s pretax profit rose 59% year-on-year to 693 million pounds ($883 billion) in the April-May quarter, the carmaker said Aug. 1.
Revenue rose 5.4% to a record £7.3bn, the highest revenue recorded by JLR in that quarter, and the EBIT margin was 8.9%, an increase of 0.3 percentage points.