Big setback for Tata Motors in Britain
Tata Motors said it could hit the Britain's biggest carmaker's annual profits by over 1.2 billion pounds and may even force an exit from the UK. Britain is set to exit the 28-member European Union in March next year.
Tata Motors share price plunged over 5 per cent on Thursday, hitting its lowest since April 2013, after the auto major's UK unit Jaguar Land Rover said a so-called “hard Brexit” would cost it 1.2 bln pounds a year, curtailing its future operations in the UK.
Reacting to the news, the stock tanked as much as 5.4 per cent to Rs 252.55 on the BSE. The stock is top percentage loser on Nifty and Nifty Auto index.
“Prima facie, 1.2 billion pounds looks on the higher side and hence the reaction to the stock today,” told Basudeb Banerjee, analysts with Ambit Capital Reuters.
"Management must have factored in bulk of this adversity in their 4-7 per cent FY EBIT margin guidance," he added.
Issuing a stark warning against a 'bad Brexit deal', Tata Motors said it could hit the Britain's biggest carmaker's annual profits by over 1.2 billion pounds and may even force an exit from the UK.
Britain is set to exit the 28-member European Union in March next year.
"A bad Brexit deal would cost Jaguar Land Rover (JLR) more than 1.2 billion pounds profit each year. As a result, we would have to drastically adjust our spending profile," JLR CEO Ralf Speth warned in a statement yesterday, as British Prime Minister Theresa May prepared for a crucial meeting with her Cabinet at her country retreat of Chequers to hammer out the contours of a new post-Brexit customs arrangement with the European Union (EU) tomorrow.
"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," he said.
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"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 said.
JLR is the UK's largest carmaker, which has witnessed a complete turnaround in its fortunes since Tata Motors acquired the traditional British brands from Ford 10 years ago.