Lockdowns in China adversely impact Tata Motors’ supply chains

New Delhi: The recent lockdowns in China have adversely impacted Tata Motors’ supply chains as its suppliers are unable to deliver products and it could be forced to stop production in some or all of its plants if it is unable to ensure the supply of critical parts from the country, according to the company’s annual report for FY22.

The homegrown auto major has apprehensions that the ongoing global semiconductor shortage may impact it “more pronouncedly” than its competitors, who may have a greater level of buying power with suppliers or have features in their vehicles that depend on semiconductors.

“Recent lockdowns in parts of China as the government pursues a strategy of containing the spread of COVID-19 are adversely impacting our supply chains as our suppliers are unable to produce or deliver products to us,” Tata Motors said in the report.

Similarly, it said, “we are also witnessing a temporary decrease in demand. These lockdowns have also led to some dealerships in some regions of China to temporarily close, which may have an adverse impact upon our sales outlook in fiscal 2023”.

In its elaboration of risk factors, Tata Motors further said, “If we are unable to ensure a supply of critical parts from China for production, we may be forced to stop production in some or all of our plants, which will have a significantly negative impact on our cash flow in the future”.

“We are witnessing certain supply chain disruptions as a result of China’s lockdowns and dealership closures possibly resulting in negative EBIT and negative free cash flows in the first quarter of fiscal 2023 for Jaguar Land Rover while our domestic business is also likely to witness a negative impact on financial performance,” it added.

On the ongoing shortage in the supply of semiconductors, Tata Motors said it has “impacted and continues to impact our production schedules and our ability to meet the demand for some of our vehicles”.