TOKYO -- Toyota Motor Corp. warned that a withdrawal by the UK from the European Union may lead to levies of as much as 10 percent on the cars it builds in Britain.
Brexit would challenge Toyota to cut costs or make its cars more expensive and hurt sales, the automaker said in a letter on Monday to its UK employees. Toyota provided a copy of the letter, which says the company exports almost 90 percent of the vehicles it builds in the UK, and three-quarters of the cars are sold in the EU.
"Continued British membership of the EU is best for our operations and our long term competitiveness," Toyota said in the letter, signed by two executives at its UK manufacturing unit and a trade union representative. "We will face significant business challenges as a result of a decision to withdraw from the EU."
Toyota said it's committed to its factories and employees in the UK, where it built more than 190,000 Avensis and Auris cars in its Burnaston plant in 2015. Another factory at Deeside, where more than 200,000 engines and 35,000 components were produced last year, is set to build new 1.8-liter hybrid engines for the upcoming C-HR crossover.
Having invested $59 billion in the UK, Japan Inc. has been vocal in its support of Britain staying within the 28-nation trading bloc ahead of Thursday's referendum. Nissan Motor Co. CEO Carlos Ghosn has said the UK staying part of the EU makes the most sense for jobs, trade and costs, while Hitachi Ltd. Chairman Hiroaki Nakanishi has said Brexit may force the company to "rethink" its UK operations.
Ford, BMW, JLR worries
Ford joined other carmakers including Nissan in writing to employees to warn of the negative impact of leaving the EU. Ford, which employs about 14,000 workers in the U.K., said a Brexit could cost the business "hundreds of millions of dollars every year."
Nissan, which operates a large factory in Sunderland in northern England, said "we prefer stability to a collection of unknowns." Nissan said it initiated legal action against the Leave campaign to halt its use of the Japanese carmaker's logo.
Automakers and their suppliers share "widespread concern" with Brexit jeopardizing jobs and investment, the Society of Motor Manufacturers and Traders said on Monday in a statement.
Advocates in the remain camp quoted by the trade group include Ian Robertson, BMW Group's head of sales and Jaguar Land Rover, the UK's biggest automaker by production volume.
Leaving the EU would be "highly damaging" and make the carmaker's products less competitive in Europe, Jaguar Land Rover CEO Ralf Speth said in a letter to employees on Monday, provided to Bloomberg News.
"It would become more difficult to buy components and sell our products in our largest market," Speth wrote employees, warning of "increasing and higher tariffs" in Europe. "This is not just an employer's view or that of 'big business.' It is also the conviction of the unions who represent you."
The effect of a Brexit could ripple beyond the U.K. Earnings for the global car industry are set for a drop of more than 8 billion euros ($9.1 billion) as car sales in the U.K. tumble, depressing production in Western Europe, Arndt Ellinghorst, a London-based analyst with Evercore ISI, said in a note.
The U.K. car market, one of the most profitable in Europe, would probably decline by about 14 percent next year, he said.