However, JLR will get affected only until the Brexit transmission is sorted out, analysts say
Tata Motors owned-Jaguar Land Rover (JLR), which has lined up around £13.5 billion (Rs 1.2 lakh crore) for expansion, faces a rocky road ahead as US President Donald Trump, in a retaliatory move, has threatened to levy 20% tax on cars imported from Europe.
Apart from China, the US is the only other major market for JLR as sales in the UK and Europe have been sliding in recent years due to an economic slowdown.
Targeting imported automobiles from Europe, Trump recently said in Tweet that if the European Union (EU) does not remove the duties it levies on the US cars, then it should get ready for a retaliatory step of 20% tax on all assembled cars imported from Europe. The announcement saw the shares of European automobile companies having no assembly plant in the US sliding down. Shares of JLR parent Tata Motors tanked nearly 6% on Monday.
The automobile sector has come under special consideration from Trump administration in its trade war with other countries, including allies. In February last year, referring to India, Trump had said that he is 'pained' to see high duties of as much as 100% levied on American bikes including the iconic Harley-Davidson by certain countries.
India, in response, lowered the duties to 50%, which still did not go well with Trump, who again in February this year threatened India with a reciprocal tax.
The industry insiders and analysts are of the view that if the US threat gets implemented, then it is surely going to affect the sales of JLR in the country where that accounts for its 21% of annual sales by volumes. China is the only other growing market for JLR as its business in the UK and overall Europe suffers because of economic slowdown.
According to Ashim Sharma, partner and group head, Nomura Research Institute (NRI) Consulting, "Any type of tariff increase will shoot up the price of the car and adversely affects the demand." JLR will get affected only until the Brexit transmission is sorted out, and after that, the tax may depend upon how the UK levies the taxes on US automobiles, Sharma added.
Another Mumbai-based analyst concurs. A 20% spike in tax on the cars is not a small amount and it will end up negatively impacting JLR in the US market, he said.
Meanwhile, JLR, during a presentation made to the UK investors last week said that it has lined up investment worth £13.5 billion in the next three years on new models, technology development and capacity addition.
Earlier in May this year, JLR had said during the announcement of Tata Motors's quarterly results that it will spend about £4.5 billion pounds ($5.3 billion) in the current financial year on new models and technologies as it looks to spur sales.
The company said that the investments will be in new models, technology, capacity with a significant amount of it on electrification and on a new platform, modular longitudinal architecture (MLA).
"Our roll out to MLA will be fully complete by 2025, at which point every product can cater for an ICE (internal combustion engine), BEV (battery electric vehicle) or PHEV (plug-in hybrid electric vehicle) derivative," JLR said in the presentation.
The company added that it will launch four new models by financial year (FY) 2024, taking the total nameplates in its portfolio to 16 from 12 at present. Besides, it has also lined up a total of 99 different 'product actions' during the time period.JLR has been investing heavily over a period of time with an aim to have a significant presence in the global luxury automotive market which is currently dominated by German firms Mercedes, BMW and Audi. During FY2011 to FY2018, JLR has invested over £20 billion in new products, technology, capacity and infrastructure, it said in the presentation.
COLLATERAL HIT
- Trump recently said that if the EU does not remove the duties on the US cars, then it should get ready for 20% tax
- Shares of JLR parent Tata Motors tanked nearly 6% on Monday
- JLR has said that it will launch four new models by financial year 2024
(With inputs from PTI)
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