Tata Motors is getting ready to face possible impact if the UK votes itself out of European Union with the Brexit. The United Kingdom is getting ready to vote this week to decide if they would like to stay or leave EU.
If Britain votes to leave the EU, then they will re-draw policies in terms of trade with other European countries. In the auto space, Tata Motors subsidiary, Jaguar Land Rover (JLR) which contributes nearly 90 percent of Tata's profits could be impacted due to the change to duties on import and export.
JLR depends on other European countries to provide components, which is 40 percent, this will alter the existing tariffs on the import of the components.
Abdul Majeed, partner and auto practice leader, PricewaterhouseCoopers, said "If the UK decides to exit EU, it can either enter into a Free Trade Agreement with EU or can go by the WTO norms for trade. This will have a negative impact on the cost of exports, sales and workforce as well. It will be a short-term impact, but it will be a negative one. UK has always been a strong member in the EU and its exit will definitely be felt in the EU as well. The UK economy will definitely feel the hit, and is expected to slow down for a couple of years thanks to the tariffs and duties."
He also mentioned that "The other part of the story is that should the Sterling Pound depreciate in its value, it will have a benefit on JLR as most of its vehicles are manufactured in the UK and almost 80 percent of them are exported."
Any impact on JLR will have direct connections with Tata Motors and they are having a close look on the outcome of the vote on Brexit.