Tata’s £4bn gigafactory plan fills in a major blank for UK car industry | Automotive industry

For months Tata, the owner of Jaguar Land Rover, has left the UK automotive industry on edge. Would it build an electric vehicle battery “gigafactory” near its UK car plants, or would it be tempted by Spain, which offered an attractive deal? On Wednesday it finally offered a definitive answer: Tata will build a new factory in the UK.

The plant will require £4bn in investment and will provide thousands of jobs in a region not known for its automotive industry if, as expected, a site in Somerset passes final due diligence checks. However, its importance will be measured in more than just jobs or pounds: it will show that the UK has a place in the next era of the automotive industry as electric technology replaces the combustion engine.

The government had to pay handsomely for that privilege: the support is worth £500m in grants and upgrades to local infrastructure, according to an official. The relief in the car industry is clear, as executives confronted the prospect of a sector slowly withering as investments surged elsewhere in Europe and battery startups failed.

“It’s about bloody time, too,” says one person closely involved with the process. “It’s justified because if we don’t do something then we’re going to lose the initiative.”

Workers in the cell manufacture (clean room) area at Envision’s gigafactory in Sunderland. Photograph: Richard Saker/The Guardian

China is by far the dominant player in global battery supply, with 78% of the market at the end of 2022, according to the data company Benchmark Minerals. Europe is racing to catch up, with more than 30 plants in construction or planning, including three in France and nine in Germany. Before Wednesday, the UK was looking exposed, with only one.

Tata’s new plant will produce batteries with 40 gigawatt hours (GWh) of capacity a year, enough to power hundreds of thousands of electric cars. The government-backed Faraday Institution has said the UK car industry will require 100GWh of battery capacity by 2030. That figure includes other uses of batteries beyond cars – such as for households and industry. Nevertheless, combined with Envision’s 38GWh of planned capacity at a plant in Sunderland to supply Nissan’s factory next door, Tata’s £4bn commitment will bring the UK closer to that goal.

The Nissan story provides an example of what the government hopes the backing for Tata will achieve. The Tory prime minister Margaret Thatcher drove the negotiations that brought the Japanese firm to Sunderland, presiding over its 1986 opening, in a first-of-its-kind partnership between the UK and a foreign manufacturer. More foreign carmakers followed, which needed to be served by smaller-scale manufacturers car parts and components.

That allowed Britain to keep its place as a major automotive player, even as domestic companies took a back seat. UK car factories employ 182,000 people, according to the Society of Motor Manufacturers and Traders, a lobby group. However, many of the jobs are tied directly to making internal combustion engines or petrol and diesel cars. Shifting to battery technology will help the industry to stay the same size – albeit probably a different geographical shape.

It may not all be plain sailing for Tata’s Agratas unit, the new subsidiary that will build the gigafactory. Amid the battery subsidy war, few like to acknowledge that battery production is a low-margin business that requires enormous upfront investment. Unlike Envision, Tata does not have more than a decade of technological knowhow, even if it does have deep pockets and experience of building new businesses in areas such as consulting and IT.

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There also remain big strategic questions over the government’s approach to industry – particularly in the “hard-to-abate” sectors such as steelmaking, where upgrades to technologies capable of net zero carbon emissions are needed. Tata itself is the owner of Port Talbot steelworks in south Wales, where two of the UK’s four blastfurnaces constantly spew out carbon. Tata had initially tried to link talks on the gigafactory with those on aid for the steelworks. The government has offered £300m, but that must rise if it is to match European rivals’ support for steel.

Yet for the UK car industry the Tata investment fills in a major blank. The UK’s largest automotive employer may be owned by an Indian company, but it will still rely on UK employees and technology. It is a victory for Britain – albeit one that many experts suggest the country could not have afforded to lose.

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