The exit of Britain from the European Union on Friday does not augur well for Jaguar and Land Rover, the luxury car making subsidiary of Tata Motors, as volumes in the rest of Europe and export revenues may decrease significantly due to the depreciation of the pound against the US dollar and economic uncertainty that will prevail due to Britain’s decision to part ways from the EU.
The British pound on Friday initially fell by 11% on Friday and was trading at 1.3887 to the US dollar, down by 6.6% as of 15.41 pm (local time). The currency had plunged to $1.3229 to hit the lowest level in more than thirty years following the outcome of Brexit.
“For Jaguar Land Rover, today is just business as usual. We respect the views of the British people and in line with all other businesses, Jaguar Land Rover will manage the long-term impact and implications of this decision: nothing will change for us, or the automotive industry, overnight,” said Tata Motors
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According to experts in the automobile sector, the exports of JLR will be hit significantly and may also impact the profitability in the near term. Last year JLR shipped 2,24585 cars in different markets across Europe which is one the largest market for JLR along with North America, China and home country Britain.
As a part of the European Union, Britain enjoyed favorable export treaties with other member countries of the union. As a consequence of the Brexit referendum the products of JLR will become more expensive in rest of Europe region when compared to Audi and Mercedes Benz which may have an impact on volumes.
“JLR may put all the investments on hold as unless the company gets further clarity which will come once Britain negotiates the terms of exit. JLR cars will become more expensive when compared to the German manufactures which may lead to reduction in market share,” said Puneet Gupta, Associate Director IHS Automotive.
The significant growth in the Europe and North America helped JLR compensate the loss of volumes in China. Currently Europe constitutes 20% of the total volumes of JLR.
“There will be a significant negotiating period, and we look forward to understanding more about that as details emerge. We look forward to working with the British government and the automotive sector to ensure that the UK’s automotive industry remains as competitive as ever,” added the company in the statement.
The JLR has recently commissioned the new manufacturing capacity in Brazil as the company was anticipating significant increase in volumes with new product introductions like Jaguar XE and Discovery Sport.