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Aug 23

Finally! Land Rover Starts Facing the Heat of Brexit

British marquee SUV manufacturer was about to beat its rivals but is now facing the heat of Brexit

The decision of the Britain to leave the European Union last month has left the majority of businesses in a state of uncertainty. Majority of businesses and car manufacturers are on top of the list because Brexit has dire effects on car manufacturers including Tata Motors – the owner of the largest luxury car manufacturer in the UK. The Land Rover Discovery, Range Rover Evoque and many models like these are famous in the UK with powerful engines and both manual and automatic gearboxes.

The manufacturer is back in the game with full power and made the half year sales record in the UK and sold around 291,556 vehicles in the first half year. It was more than 22 percent extra sales on year-over-year bases. Initially, Jaguar boosted up the sales by 64 percent in the first half of the year. It happened due to increased demand of compact luxury vehicles in the UK. This was best ever half year of sales in the UK, beating the sales records made by German automakers Audi, BMW and Mercedes-Benz in the UK and European Union.

JLR in the UK

The UK has once more has proved a largest market for Land Rover and it is beating the last year sales of Land Rover in China due to the strong demand of vehicles in the UK. The UK only has given a boost to the JLR sales by 21 percent in the first half of 2016 only. Jaguar Land Rover has it’s headquarter in the UK and it employes around 25,000 workers in the UK only, while only 1000 employees are across the globe.

Brexit and Land Rover

The decision to leave the EU weighed heavily on the consumers and impacted badly on the confidence of the businesses in the UK since last two months. It has also impacted very negatively on the sales due to increased uncertainty.

Land Rover sales have also been badly impacted by Brexit vote on 23rd of June. Although deliveries start weeks or even months after the buying decision but it has badly impacted the sales in the month of July. However, Jaguar Land Rover tried to push the sales as much as possible in the July but it had left a bad impact on the sales in the month of June even being a largest seller in the UK only. It is still possible that a probable slowdown in the sales will impact the sales even badly and will impact the revenues as well.

 Probable consequences of Brexit

It is expected that the tariffs on the border crossing sales and imposed border rules for the traders among the EU countries and the UK will definitely affect the sales and even operations of Land Rover including the workforce sourcing and eve the outsourcing of parts from European Union.  Apart from the UK, Europe gives around 18 percent sales to the Jaguar Land Rover and these sales are now on the edge. On other hand, around 80 percent production is based in the UK and sales across the globe, which makes the situation even tough and tight for the Jaguar Land Rover.

Land Rover in Europe excluding the UK

If we consider the operations of the company outside the UK, it is very clear that the company has higher number of interests in the European Union while nesting in the UK. Let’s consider first half of the year only to keep the things less complicated.  Europe without UK has formed just under 20 percent sales and vehicle deliveries in the last six months till the vote for Brexit. It is also interesting to know that more than 80 percent of manufacturing was done in the UK at JLR’s largest manufacturing facilities in the West Midlands area. The majority of those manufactured Land Rovers was sold abroad and was around 94 percent.

90 percent share of EU in total production

European Union has more than 94 percent share in the overall production of vehicles even settled in the UK. Approximately, worth of 11 billion pound sterling automotive parts were imported from the manufacturers in the European Union and again these parts were imported in only first six months of the year. One third of these parts were imported from the high tech manufacturers in Germany only, stated Roland Berger.

Facing the Heat of Brexit now

Now after leaving the European Union, the businesses in the UK is in state of uncertainty and so is the case of Jaguar Land Rover. Now after starting the era of independent UK, there will be tariffs on trade, customs on imports and taxes on exports as well. All these factors will lead to the added costs to the overall cost of goods manufactured. This situation will definitely lead to the increase in the prices of Land Rover vehicles across the UK and Europe as well. It will further lead to the uncertainty and will make Europe a less competitive market for the Land Rover Discovery vehicles. The chief competitors in the European Union will definitely take the advantage of this situation by stabling the prices in the region due to less added costs. It is expected that Land Rover will be washed out of European Union markets against the manufacturers like Audi, BMW, Mercedes-Benz and Volkswagen.

 Economic Situation of the UK

The Brexit has badly impacted the economic stability of the UK and pound sterling had fluctuated badly by more than 10 percent against euro and U.S. dollar. Jaguar Land Rover will try to handle this situation by powering its wholly owned manufacturing facilities outside the UK. It will try to give less importance to those three facilities in west Midlands, Solihull and Halewood. Stability of Dollar will help the manufacturer in the U.S. markets and will playout in the favour of Jaguar Land Rover. It will be very imperative for the automaker to stable its prices across the UK and Europe to keep the competitiveness index on their side.

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