Tata Motors-Owned Jaguar Land Rover Uncertain Over Brexit; Might Move Out Of The UK

In a move which could take the production of Tata Motors-owned Jaguar Land Rover (JLR) out of the UK, the Chief Executive Officer of Jaguar Land Rover Automotive plc announced that the UK Government needs to urgently provide certainty for business including guaranteed tariff-free access and frictionless trade with the European Union. Ahead of the publication of a white paper outlining the UK Government's proposed post-Brexit trading relationship with the EU, Chief Executive Officer of JLR Automotive said that the company's heart and soul is in the UK, but the current scenario might make it difficult for the company to function as it could incur heavy losses due to the ongoing Brexit negotiations. If the negotiations fail, more than 40,000 UK-based employees might get affected.

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Prof. Dr. Ralf Speth, CEO, Jaguar Land Rover Automotive said, "Jaguar Land Rover's heart and soul is in the UK. However we, and our partners in the supply chain, face an unpredictable future if the Brexit negotiations do not maintain free and frictionless trade with the EU and unrestricted access to the single market. We urgently need greater certainty to continue to invest heavily in the UK and safeguard our suppliers, customers and 40,000 British-based employees."

He added, "A bad Brexit deal would cost Jaguar Land Rover more than GBP 1.2 billion (Rs. 10,911 crore) profit each year. As a result, we would have to drastically adjust our spending profile; we have spent around GBP 50 billion (Rs. 45,441 crore) in the UK in the past five years - with plans for a further GBP 80 billion (Rs. 72,706 crore) more in the next five. This would be in jeopardy should we be faced with the wrong outcome."

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Britain has championed free markets and made the case for free trade. If the UK automotive industry is to remain globally competitive and protect 300,000 jobs in Jaguar Land Rover and our supply chain, the company must retain tariff and customs-free access to trade and talent with no change to current EU regulations.

PB Balaji, CFO, Tata Motors Group said, "Jaguar Land Rover and Tata Motors have always maintained that the uncertainties from Brexit are avoidable and the business seeks clarity to ensure that industry takes timely and right decisions to manage the transition. Additionally, Jaguar Land Rover needs free and full access to the single market beyond transition to remain competitive which we also firmly believe is in the best long term interests of the United Kingdom."

Also Read: Tata Motors Seeks 20 Per Cent Dividend From Jaguar Land Rover In FY 2018

According to the new plan for 2018 financial year, JLR will pay parent company Tata Motors 20 per cent divided from its profits. Earlier it was a fixed sum of GBP 150 million (Rs. 1369 crore), but now in FY 2018, the latter paid Tata Motors a sum of GBP 225 million (Rs. 2054 crore), which is almost double of what JLR used to pay. In the 2018-19 financial year, the dividend will increase to 25 per cent from the current 20 per cent.

However, Balaji emphasized on the fact that the Brexit will only hurt JLR and the UK government needs to figure out a way to secure the huge investment and also the livelihood of the employees. 

"The recent statement from JLR only reaffirms this position that a Brexit which increases bureaucracy, reduces productivity and competitiveness of the UK Industry is in no-one's interest. As this worst case Brexit scenario is just one of the many possibilities, our plans which were shared at the JLR analyst meet in the UK did not factor them and we continue to stand by what was shared. In the meanwhile, JLR will continue to work with government to secure the right free trade deal for the country, economy and industry."

JLR joins a growing list of companies which have raised concerns about potential disruption to business if Britain crashes out of the bloc next March without a trading agreement with the European Union, a so-called hard Brexit.