If Brexit were to happen Jaguar Land Rover could face a $1.47 billion in taxes by 2020.
According to two sources who are familiar with the matter at hand, Britain’s largest car manufacturer, Jaguar Land Rover, could face the brunt of the impact if British voters decide to leave the safety of the European Union.
Jaguar Land Rover’s profit could be hit by an estimated $1.47 billion in the next four years if Brexit were to happen
According to internal documents prepared by Jaguar Land Rover’s chief economist David Rea and seen by both sources, the company has prepared worst-case scenario estimates which outline the possible impacts in the case of a Brexit.
Brexit would hit Jaguar Land Rover’s expansion plans
Founded in 1922 and headquartered in Coventry, Central England, Jaguar Land Rover will have to open an office in the EU if Britain were to leave the world’s largest trading bloc.
In that event, it will also have to put on hold its plan of starting a major manufacturing plant in Slovakia, which was announced last December. It may even have to re-negotiate on a deal to lease property at Silverstone race track.
Furthermore, according to the sources, if Brexit were to happen, Jaguar Land Rover would see a decline of nearly 1 billion pound in pre-tax profits by 2020. As a consequence of that event Britain will return to the WTO regime for trade with Europe which will involve the imposition of a 10% tariff on exports and nearly a 4% tariff on imports on components.
“It may at worst cost us about 1 billion pounds,” said one of the sources when asked how Jaguar Land Rover (JLR) had phrased the wording in the 89-page report, entitled ‘Referendum: The View’.
The report had been made available to Jaguar Land Rover’s board during an internal presentation.
Incidentally, the company has made a pre-tax profit of 1.6 billion pounds for 2015/16.
Confirming that it has explored the very real possibility of a Brexit, Tata Motors, which sold a quarter of its 520,000 cars in Europe, has said Brexit will have an impact on its operations.
“As part of our standard business planning process, we regularly look at macro-economic and geo-political developments around the world,” said a spokesman for JLR. It went on to read, “Like any other responsible global business, we have analyzed the impact of any potential UK departure from the EU. However, we are not discussing details of any internal business analysis.”
Other big companies will also be majorly affected.
Case in point: Ford, which builds its car engines in Britain, has disclosed it could face an additional tariff of 2.7% on engine exports and upto 10% on imported components for its vehicles.
‘Leave’ campaigners have however countered this point by saying since French and German cars are very popular in Britain, this could provide them a leverage to renegotiate tariffs.
According to a source, the renegotiation could however take a couple of years which could costs manufacturers hundreds of millions of pounds.
If Jaguar Land Rover if forced to swallow the bullet, as the country’s biggest car manufacturer, it will deeply impact the country’s resurgent car industry, which has been lauded by British lawmakers as a sign of Britain’s manufacturing prowess. With Britain’s car manufacturing activity trending on an all-time high production, a Brexit vote could force it off this trend.
Understandably, JLR which manufactured nearly 1.6 million cars last year, and is undergoing a major expansion of its lineup, has joined the rest of the foreign-owned car manufacturing industry to call on British voters to remain within the bloc.
“They are deeply worried about being outside of the EU…They have been holding off on meaningful expenditure,” said a source who is familiar with the matter at hand.
Ralph Speth, JLR’s CEO has been speaking consistently in favor of continued EU membership, wrote to workers earlier this week on Monday warning of the possible consequences of a Brexit on the firm.
“It is inevitable that we would face increasing and higher tariffs, making our products less competitive in Europe,” reads a portion of the letter written by Speth.
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