Tata Motors tanks 15% as Brexit shock raises UK biz concerns

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Moneycontrol Bureau Auto stocks are under immense selling pressure as UK has decided to march out of the European Union. BSE Auto index is down over 5 percent at 11 am with benchmark indices tumbling over 3 percent each. Tata Motors sank 15 percent intraday on Friday. Tata Motors’ British subsidiary Jaguar Land Rover (JLR) had earlier said that it may suffer an estimated 1 billion pounds by 2020 if Britain exits EU. The analysis expects the £1 billion hit to come from a 10 percent levy on vehicles being exported to Europe and 4 percent on imports of components for the production of vehicles. In an earlier note CLSA had said that import tariffs may apply on both legs post-Brexit, which would adversely impact JLR as it derives 24 percent of its volumes and sources 35-40 percent of its components from Europe. It had also warned  that import tariffs may make JLR’s vehicles more expensive than German luxury cars in Europe. JLR’s costs would also go up if it has to pay import duties on components sourced from the EU and adversely impact JLR volumes as well as margins.

A press statement from Jaguar Land Rover said that the company  respects views of the British people and in line with all other businesses, Jaguar Land Rover will manage the long-term impact and implications of this decision: 'nothing will change for us, or the automotive industry, overnight.'

“Europe is a key strategic market for our business, comprising 20 percent of global sales, and we remain absolutely committed to our customers in the EU. There will be a significant negotiating period, and we look forward to understanding more about that as details emerge. We look forward to working with the British Government and the automotive sector to ensure that the UK’s automotive industry remains as competitive as ever, and that negotiations between the UK Government and the EU will continue to recognise the importance of car manufacturing to the UK and European economies,” JLR said.Other auto stocks with high exposure to the EU have fallen drastically. Motherson Sumi lost 12 percent and Bharat Forge fell 9 percent among others. Most economists feel that Brexit vote will likely delay FOMC rate hike and believe the most likely timing of the next rate hike is December. The pound has collapsed to its lowest level since 1985, falling 10 percent against the dollar.Posted by Nasrin SultanaFollow @NasrinzStory