Better equipped to tackle supply chain woes from lessons learnt during chip crisis: Tata Motors

Time of India

4 hours ago

HighlightsTata Motors Group has developed supply chain resiliencies from lessons learned during the semiconductor crisis, helping them better cope with challenges arising from the ongoing Israel-Iran conflict and China's restrictions on rare earth magnet exports. Jaguar Land Rover, the British subsidiary of Tata Motors, will not establish a manufacturing facility in the United States to mitigate tariff impacts, despite acknowledging a potential decrease in sales due to an increase from 2.5% to 10% tariffs. Tata Motors has not altered its electric vehicle launch plans, including the launch of the Harrier electric vehicle and the Sierra electric vehicle, despite concerns over rare earth material supply due to China's export restrictions.
Tata Motors
group is better equipped to deal with
supply chain challenges
arising from the ongoing Israel-Iran clash, China's restriction of
rare earth magnet exports
and global tariff war, having learnt from the
semiconductor crisis
during the COVID-19 pandemic, top company officials said on Tuesday.
Jaguar Land Rover
(JLR), the company's British arm that is facing a steep tariff hike for exports to the US, is not considering setting up a plant in America to address local demand, Tata Motors Group CFO PB Balaji told reporters during the company's media day interaction.
The automotive supply chains have gone through a fair amount of shock testing with the semiconductor crisis that came in the 2022-23 period.
Therefore, there are a lot of inherent learnings that businesses have got through. There are a lot of supply chain resiliencies that have been built in since then, he noted.
"Internally, we are equipped to process it better. That doesn't mean we will not have a problem. It just means that we'll be able to cope with it better, and we will just have to let... (the) time play by in terms of multiple developments that are simultaneously underway," Balaji said when asked about the impact on supply chain due to war in West Asia, China's restrictions on rare earth exports and tariff war.
On whether JLR plans to set up a manufacturing unit in the US to overcome the steep hike in tariffs, Balaji said, "As far as the manufacturing footprint is concerned, there are no plans at this point in time for any US site of any sort. We need to be careful that we don't overextend ourselves. We also need to ensure that whatever is done is done for the long term, and not just as a reactive mechanism for what it is today."
He, however, acknowledged that there will be an impact on sales of JLR in the US due to the increased tariff.
"I do expect some amount of volume shrink. It will be there, inevitably, because of the tariffs that are there. It used to be 2.5 per cent before. It is now going to be 10 per cent. So to that extent, there will be some degree of demand elasticity will be there," he said, adding that JLR sells about 1 lakh units into the US from the UK.
The company will undertake market activation "to mitigate some aspect of the demand stress that could be there", Balaji said, adding that JLR would also reroute some of the demand in other parts of the world such as the UK, Europe and the Middle East, where the impact of Israel-Iran war "has not been felt very hard to see" as yet.
Due to the tariff in the US, JLR will also face "a cost impact" and is putting a programme to manage it, which will "start from now and will probably take another 12 to 18 months to get this fully operationalised".
To a query on whether China's restrictions on rare earth exports has had an impact on JLR production, he replied in the negative asserting "we're not pressing any panic button and there is no production curtailment" and JLR has managed through combination of inventory along with alternate sources and supplies are coming through at present.
Similarly, Tata Motors Passenger Vehicle Ltd and Tata Passenger Electric Mobility Ltd Managing Director, Shailesh Chandra, said, "We are comfortable for the next few months more from a stock perspective (of rare earth)."
He also asserted that Tata Motors has not changed its EV launch plans despite China's restrictions on rare earth exports.
"There's a hope, and there's a set of actions which are internal that make us comfortable with not changing any of our launch plans. If there is significant deterioration of this issue going forward, then we might relook, but at this stage, we have absolutely no trigger to change our plans."
Chandra said the company has already launched the Harrier.ev and the planned launch of Sierra.ev is on track.
To overcome the challenge, he said the
automotive industry
has taken up the issue with the government and India's ambassador in China to sort out the issue.
"Frankly, in the short term, that's the only solution that will eventually get this sorted out. We are very hopeful, given the government's support on the topic. In the mid to long term, there are multiple solutions, and we are working with the government in terms of a certain set of efforts of being more self-sufficient, and there are multiple alternatives," Chandra said.
He further said, "In midterm, I think we'll have to look for some alternate sources, alternate countries."
To a query on the delay in the launch of
electric vehicles
under the Avinya brand, Chandra said, "Mid of 2022 we were optimistic that in a two-and-a-half year, we would be able to come with this kind of a launch, but it had to undergo certain changes because of feasibility issues in certain subsystems. That led to more engineering time that went behind it. We were looking into different options from an execution perspective, all layers of architecture, and that led to more time than what we needed."
EVs under the Avinya brand are now expected in late 2026 or early 2026.