MUMBAI (NewsRise) -- Jaguar Land Rover, the British luxury vehicle unit of India's Tata Motors, on Thursday warned a "bad Brexit deal" would cost the company billions of dollars, jeopardizing its future investments in the U.K.
Ralf Speth, the chief executive of Britain's largest car maker, called upon the U.K. government to urgently provide "certainty for business," including guaranteed tariff-free access and frictionless trade with the European Union.
Speth's comments come as Britain braces to exit the bloc next year, marking one of the biggest policy shifts for the region in half a century. The lingering uncertainty regarding future economic relationships in the region has stirred fears of a so-called hard Brexit, where Britain would leave the bloc without a trading agreement with the EU.
British Prime Minister Theresa May and her cabinet ministers are set to decide on a strategy to negotiate Britain's way out of the EU on Friday, according to a Reuters report.
"A bad Brexit deal would cost Jaguar Land Rover more than 1.2 billion pounds ($1.6 billion) in profit each year," Speth said in a statement. "As a result, we would have to drastically adjust our spending profile."
JLR, which makes one in three cars produced in the U.K., has three plants in the country--the largest of which in Solihull builds 1,500 cars per day using 15 million components. Any delay in parts delivery would force the suspension of production at a cost of 1.25 million pounds per hour, the company said.
Speth said JLR spent 50 billion pounds in the country in the past five years and is planning to spend another 80 billion pounds in the next five years. "This would be in jeopardy should we be faced with the wrong outcome."
Mumbai-based Tata Motors acquired the luxury automaker from Ford Motor in 2008 for $2.5 billion. JLR accounts for more than half of Tata Motors' revenue and nearly 90% of its operating profit.
Speth's comments spooked investors, sending Tata Motors shares as much as 5.4% down to their lowest in five years in Mumbai trading on Thursday. The shares later pared the losses to close down 1.5%, while the benchmark S&P BSE Sensex lost 0.2%.
Reiterating JLR's comments, Tata Motors on Thursday said the British company needs "free and full access to the single market beyond transition to remain competitive."
"JLR will continue to work with the government to secure the right free-trade deal for the country, economy, and industry," P. Balaji, chief financial officer of Tata Motors, said in a separate statement to exchanges.
The economic uncertainty in the U.K. comes at a time when JLR is grappling with subdued sales amid slowing demand. Last month, the automaker said it will invest 13.5 billion pounds over next three years to shore up its flagging sales by introducing new models. At the same time, the company deserted its ambitious goal of making 1 million cars a year by the end of this decade, partly due to the economic headwinds in the U.K. and a slump in demand for diesel cars in the country.
In addition, the spectre of an escalating trade row between the U.S. and Europe is adding to JLR's woes. Last month, U.S. President Donald Trump threatened to escalate a trade war with Europe by imposing a 20% tariff on all U.S. imports of EU-assembled cars.
"A Brexit which increases bureaucracy, reduces productivity and competitiveness of the U.K. industry is in no-one's interest," CFO Balaji said.
--Dhanya Ann Thoppil