Tata’s £4bn gigafactory plan fills a big blank for the UK car industry

For months, Tata, the owner of Jaguar Land Rover, has left the UK auto industry on edge. Would he build a “gigafactory” for electric vehicle batteries close to his UK car plants, or be tempted by Spain, which offered a handsome deal? On Wednesday he finally offered a definitive answer: Tata will build a new factory in the UK.

The plant will require a £4bn investment and will create thousands of jobs in a region not known for its automotive industry if, as expected, a site in Somerset passes final due diligence checks. Its importance, however, will be measured in more than jobs or pounds: it will show the UK has a place in the next era of the car 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 improvements to local infrastructure, according to an official. The relief in the auto industry is clear, as executives were faced with the prospect of a sector slowly withering away as investment elsewhere in Europe increased and battery start-ups failed.

“It’s also about the damn timing,” says one person closely involved in the process. “It’s justified because if we don’t do something, we’re going to lose the initiative.”

Workers in the cell fabrication area (clean room) 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 by the end of 2022, according to data firm Benchmark Minerals. Europe is racing to catch up, with more than 30 plants under construction or planning, including three in France and nine in Germany. Before Wednesday, the UK looked exposed, with just one.

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

The Nissan story provides an example of what the government hopes to achieve by backing Tata. Conservative Prime Minister Margaret Thatcher spearheaded the negotiations that brought the Japanese firm to Sunderland, presiding over its opening in 1986, in a first-of-its-kind partnership between the UK and a foreign manufacturer. More foreign automakers followed, needing to be served by auto parts and components from smaller-scale manufacturers.

That allowed Britain to maintain its place as a major automotive player, even as domestic companies took a backseat. 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 directly related to the manufacture of internal combustion engines or gasoline and diesel cars. The shift to battery technology will help keep the industry the same size, although it will likely have a different geographic shape.

It may not be all smooth sailing for Tata’s Agratas unit, the new subsidiary that will build the gigafactory. In the midst of the battery subsidy war, few like to admit that battery production is a low-margin business that requires huge up-front investment. Unlike Envision, Tata doesn’t have more than a decade of tech savvy, even if it has plenty of money and experience building new businesses in areas like consulting and IT.

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Big strategic questions also remain about the government’s approach to industry, particularly in “hard-to-reduce” sectors such as steelmaking, where upgrades to technologies capable of net-zero carbon emissions are needed. Tata itself owns the Port Talbot steelworks in south Wales, where two of the UK’s four blast furnaces constantly spew carbon. Tata had initially tried to link talks about the gigafactory with aid for the steelmaker. The government has offered £300m, but it must increase if it is to match support for steel from European rivals.

However, for the UK car industry, Tata’s investment fills a huge gap. The UK’s largest automotive employer may be owned by an Indian company, but it will still be dependent on UK employees and technology. It’s a victory for Britain, although many pundits suggest the country could not have afforded to lose.

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