Before Brexit, the pound was worth about $1.46.

After the historic vote June

23, the pound crumbled to $1.31, its lowest level in more than 30
years. Heck, in some cases, the weaker pound vs. the dollar will effectively
pay the cost of shipping the vehicle, which usually runs about $1,500 from
Southampton or Liverpool to the East Coast.
http://www.autonews.com/article/20160704/OEM/307049959/brexit-looksbleaker-than-the-worst-case-scenarios

http://www.forbes.com/sites/greatspeculations/2016/06/27/why-brexit-mightbe-bad-news-for-tata-motors/#716723e5338b

Great Speculations
Buys, holds, and hopes
Opinions expressed by Forbes Contributors are their own.

Trefis Team, Contributor

Tata Motors fears of a significant loss in the revenues of its subsidiary Jaguar Land Rover, in the
event of Britains exit from the European Union have been realized. The company had estimated
a revenue decrease of nearly $ 1.37 billion (1 billion pounds) in this event, which is now
emerging as a reality. This hit is expected to come from a 10% levy on vehicles being exported to
Europe (produced in the U.K., which would no longer be part of the EU) and 4% levy on import
of components for the production of vehicles. While some experts believe that after its exit from
the EU, Britain might provide incentives to automakers to negate the impact of these levies, this
strategy would take some time to arise. In May 2016, Europe accounted for more than 25% of
JLRs sales by volume. Sales in Europe for Jaguar models had witnessed a nearly 300% increase
compared to the same month in the previous year. Imposition of taxes to sell these vehicles in
other European countries will make these vehicles less competitive in terms of pricing. If the
company does not pass on the levies to consumers, it will impact profitability by bringing down
the average revenue per vehicle. Both units sold and revenue per vehicle, are significant drivers
of the valuation of Tata Motors for its Jagaur and Land Rover divisions. According to our
estimates, both these segments together account for more than 90% of the valuation of Tata

Motors. Moreover, we expect both of these models to witness a steady rise in units sold over our
forecast period, with revenue per unit sold remaining almost stable during our forecast period.
Diversified Production, Government Incentives Silver Lining
The dark clouds over JLRs profitability do have a silver lining. The company is building
300,000 units per year at an assembly plant in Slovakia, which is a part of the European Union.
Thus, the vehicles produced in this plant will not be subject to tax levies. This plant is expected
to start production in 2018, which coincides with the tax impositions. Experts also believe that
the UK government will work out a strategy to incentivise the automobile industry, which is its
largest employer, in the next 2-3 years before the tax barriers kick in.
Impact of trade with EU
Under Article 50 of the Treaty on European Union (Lisbon treaty), a country leaving the
European Union has two years in which to negotiate a withdrawal agreement before
the treaties cease to apply to that country. During these two years, JLR would still
effectively have access to the single market without tariffs and duties.
Over the longer term, we believe there are the following possibilities that could
emerge after a Brexit:
a) The best case scenario would be if a favourable trade agreement is reached
between EU and the UK after Brexit. As per our discussions with experts, the scale
of trade interdependence between the UK and EU members and the advantages
of maintaining a close commercial arrangement could drive this possibility.
b) The other favourable scenario would be if the UK in effect remains part of the
single market by becoming a member of the European Economic Area (EEA) 1 like
Norway, Iceland and Liechtenstein, which are outside the EU but are in the EEA.
In which case, it would still have free access to the EU single market. However, it
must be noted that negotiation of a deal like Norways would entail significant
restrictions which may go against the core argument made for Brexit.