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Jaguar Land Rover anticipates £500m Brexit tariff

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Jaguar Land Rover factory
JLR is aiming to reopen some factories on 18 May
British firm expects to pay huge sum in parts tariffs if Britain leaves Europe without a deal

Jaguar Land Rover’s chief financial officer has admitted that if the UK “crashes out” of the EU with no deal, it would cost the firm £500 million per year in tariffs on parts imports alone.

Autocar found the remarks in a record of a meeting between Adrian Mardell and investment banks at the end of January. Mardell said he “fully expects” the current transition period to last until 1 January 2021, after which there will be “a different relationship”.

Mardell also said: “We’ve gone through two versions of potential crash-outs already, in the end of March [2019] and the end of October, and what we did was to protect ourselves by closing the plant for a week.

“We’ll decide at the back end of this calendar year whether that’s an appropriate measure. If we do crash out, if we go to WTO [World Trade Organization rules]… it’s about a £500m duty hit – £40m a month.”

It’s rare for a senior figure at a major car maker to quantify the cost of a no-deal Brexit and resultant use of WTO rules. But Mardell also reckons that if the UK does find itself in this situation, it won’t be for long.

“I don’t personally believe that we’d really be at those WTO levels for a significant period of time,” he said. “I think it would be a negotiating position which is negotiated away by one side or the other. I’m much more relaxed about it than I would have been two years ago, actually.”

JLR has now furloughed around 50% (20,000) of its non-critical workers during the coronavirus crisis, although it’s paying 100% of their salaries this month. Board-ranking executives have deferred their salary payments for three months, with CEO Ralf Speth’s pay being reduced by 30%.

The pandemic has had a significant effect on already-falling sales, too. The latest figures for the 2019/2020 financial year reveal JLR sold 508,659 vehicles, down 12.1% on the same period the year before. A more significant dent was made in the last financial quarter, between January and March, with sales down 30.9% year on year to 108,869.

The figures vary between brands. Jaguar’s sales took a particular hammering, down 22% overall in the year and 42.6% in the last quarter, at 28,288. Land Rover, by comparison, was down 7.7% and 25.6% respectively, selling 81,581 cars in the last quarter.

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The company is quick to point out its relative successes amid the doom and gloom, though. Range Rover Evoque sales were up by a quarter and Jaguar I-Pace sales increased by 40%. JLR also claims to have ended the financial year with £3.6 billion of cash and unaudited short-term investments, and an undrawn credit facility of £1.9bn.

JLR has announced its aim of resuming production in Austria, Slovakia and Solihull from 18 May. Other European plants will open gradually “in due course”, with work going into making the factories as safe as possible under social distancing measures. It’s expected that production will ramp up slowly, however, meaning a sales recovery will take time.

READ MORE

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