Print | Nissan to lead £2bn investment in UK electric car plant

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Nissan to lead £2bn investment in UK electric car plant

By Theo Leggett & Tom Espiner:

Nissan and its partners have announced a £2bn plan to build three electric car models at its Sunderland factory.

The Japanese firm will build electric Qashqai and Juke models at the plant alongside the next generation of the electric Leaf, which is already produced there. The scheme could help preserve the jobs of about 6,000 workers directly, and thousands more across the UK.

Nissan said that alongside this, a major new battery plant known as a "gigafactory" will also be needed.

This is in addition to the current factory adjacent to the car plant, and a further gigafactory already being built by its partner, AESC.

Nissan will spend £1.12bn on preparing its UK facilities and supply chain for the new models and training its workforce.

Alongside the gigafactory the total new investment will be up to £2bn, according to the company.

Lei Zhang, chairman of AESC, said the firm had launched a feasibility study on expanding its gigafactory operations in Sunderland. The plan is expected to receive government support, though it is not clear what form that will take. Nissan has confirmed it will receive £15m in funding for its research centre in Bedfordshire.

The Unite union said the plan "secures the long-term future of the site and the thousands of skilled well-paid jobs it supports", but called for more government support for the car industry.

Earlier this year, Nissan's chief operating officer Ashwani Gupta, who has since left the firm, said that the UK would struggle to remain competitive with other car-making countries because of higher manufacturing costs, elevated by energy bills and inflation.

Alan Johnson, Nissan's senior vice president of manufacturing and supply chain, told the BBC's Today programme that the UK "can be a competitive place for car production, but everything needs to be right".

"Not just the plant itself, but the surrounding environment: energy costs, infrastructure, local government [and] national government support, needs to be right for it to work," he said.

The UK government has provided support for Nissan through the Automotive Transformation Fund, which received a £2bn top-up in the Autumn Statement on Wednesday.

Mr Johnson declined to comment on how much funding the company has received from UK taxpayers.

He said: "The support we have received in the past has been excellent and we're very grateful for the support we do receive.

"The truth is discussions are ongoing with the government, not concluded, and therefore I'm not in a position at the moment to make any announcement or any comment about any numbers."

The government's contribution to Nissan's project is understood to be about £100m, and if the gigafactory goes ahead, the funding for that will also be about £100m.

Nissan's announcement comes as an "investment zone" for North East England was confirmed by the government. The government said it will create more than 4,000 jobs over five years.

Brexit

In the summer, Mr Gupta also warned that the UK's largest car manufacturing plant in Sunderland would be "unsustainable" without a post-Brexit trade deal on tariffs.

Rules due to take effect in January next year mean there will be a 10% tariff on cars sold between the UK and EU unless carmakers have sourced at least 45% of their components by value from the UK or EU.

Batteries are the most expensive part of an electric vehicle, and some manufacturers in both the UK and EU have said they will struggle to meet the requirements, and have called for the rules to be deferred.

Mr Johnson said that Nissan exports 80% of the vehicles made at its Sunderland plant, "so of course exportation is critical to our success".

"In terms of the Brexit deal, we're just getting on with it," he said, adding that the key to Nissan's strategy is "having your major investments like battery production in the UK".

Other car makers have also expressed concerns about the tariffs.

In May, Stellantis, which owns Vauxhall, Peugeot, Citroen and Fiat, said it may have to close UK factories if the government did not renegotiate the Brexit deal.

The firm has made a commitment to making electric cars in the UK, but said that if the cost "becomes uncompetitive and unsustainable, operations will close".

The AESC plant in Sunderland is the only one in the UK currently making electric vehicle batteries, but Jaguar Land Rover owner Tata plans to build a £4bn factory in Somerset.

Some battery firms have had problems setting up in the UK.

Britishvolt, which planned to make batteries in the North East, went into administration earlier this year. It was taken over by Australian firm Recharge Industries, but that hasn't gone smoothly either, with £2.5m of the purchase price still unpaid months after it was due.

By contrast the EU has 35 plants open, under construction or planned.

In September Prime Minister Rishi Sunak announced a major shift in UK green policy by delaying a ban on new petrol and diesel cars by five years, to 2035.

Nissan said in September it would not change its timetable, and that it would stick to manufacturing electric vehicles only by 2030.

The firm's boss Makoto Uchida said at the time it was the right thing to do for its business, customers and for the planet.

Postponing the ban has had a knock-on effect on the number of electric vehicles expected to be sold in the UK by 2027.

The government's independent economic forecaster, the Office for Budget Responsibility, said on Wednesday that just 38% of new vehicles sold in the UK in 2027 would be electric, lower than the 67% it predicted in March.