Jaguar Land Rover boss warns of annual £1.2 billion hit due to Brexit

Jaguar Land Rover (JLR) CEO Ralf Speth has issued a warning to the UK government that a so-called hard Brexit could cost the company £1.2 billion (Rs 11,811 crore ) per year in tariffs and ultimately force it out of the UK. 

EU-imposed tariffs on £5 billion-worth (Rs 49,215 crore) of imported parts for JLR (40% of the total number of parts used), as well as the 20% of the two brands' production volume, would mount costs for the company, threatening its future operations here. 

Speth warned of the threat to JLR of a no-deal Brexit, saying: “I don’t want to threaten anybody, but we have to make transparent the implications of the move. We want to stay in the UK. Jaguar Land Rover’s heart and soul is in the UK.”

If the only option to save the company post-Brexit were to be moving out of the UK, that would happen, he said. “If I’m forced to go out because we don’t have the right deal, then we have to close plants here in the UK and it will be very, very sad. This is hypothetical, and I hope it’s an option we never have to go for.”

Speth highlighted the company’s progress since 2010, saying: “We built up this company over eight years. All that will be undone. It can go down the river so quickly. We urgently need greater certainty to continue to invest heavily in the UK and safeguard our suppliers, customers and 40,000 British-based employees."

JLR currently invests around £5 billion (Rs 49,215 crore) per year in research and development and its production facilities, while its employees contribute £2 billion (Rs 19,686 crore) per year to the UK in income tax. As the Jaguar and Land Rover brands grow their electric and autonomous offerings, this investment will grow.

Of particular note was Speth's warning about JLR's importance in fulfilling the Government's ambition for the UK to become a hub of electric and autonomous technology development. “Electrification and connectivity offer significant economic and productivity opportunities. Get Brexit wrong and British people, businesses and broader society lose the chance to lead in smart mobility”, he said.

JLR’s difficulties in recent months have included the decision to lay off 1000 of its 40,000 UK employees amid the diesel downturn and decreased domestic and European demand for its cars.

UK demand fell 21% in the first quarter and registrations fell by 9.3% for Land Rover and 11% for Jaguar across the first six months of 2018. This came despite a booming SUV segment well catered-for by the two brands, with new products in key markets. 

Demand for some of the brands’ top models has blunted early in 2018, and the company blames Brexit and the diesel uncertainty for this instability in its sales. JLR describes this as a short-term problem, however.

Speth’s Brexit threat is just the latest issued to the Government by UK manufacturing giants. SMMT chief executive Mike Hawes has been outspoken on the issue since the referendum in June 2016, while a BMW executive recently called into question the future of Mini and Rolls-Royce in the UK, although this was quickly scaled back by the company's special representative to the UK, Ian Robertson.

Tata Motors Group issues statement
Meanwhile, earlier today, PB Balaji, CFO, Tata Motors Group, issued a statement saying, “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.”

“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.”