Manganese Bronze, the maker of London's iconic taxis, has suspended trading in its shares after it recalled its new TX4 model.
The company, which has been reporting losses since 2008, said it recalled about 400 TX4 London taxis after it found a defect in a steering box that was introduced in February.
"The suspension of sales will have a very material and detrimental impact on the group's cash flows and the board is working to establish the options available to the business given the impact on working capital," the company said in a statement.
Manganese Bronze, which is 20 per cent owned by China's Geely Automobile Holdings, said it was working with Geely to fix the steering box faults.
"We're not a in a position yet to give a view as to what it will cost us to fix it, nor can we make an estimate of what the cash impact will be," chief executive John Russell said. "We need to work our way through to the technical solution and then get a sense of how long that's going to take and we can make the judgements on both the profit effect and the cash effect but that's going to take us some time," he said.
The steering box is a design from a new supplier in China, which was introduced in the company's Coventry factory in late February.
"We've now got teams of guys working with the supplier in China and we're trying to identify the root cause," Russell said, adding that the defect had safety implications.
The company, which has been struggling with falling sales in the UK, also sells its cars in China and Azerbaijan.