By Guy Faulconbridge and Paul Sandle
SUNDERLAND, England (Reuters) -Nissan Motor Co bet on Britain to supercharge its European electric future on Thursday, pledging $1.4 billion with its Chinese partner to build a giant battery plant that will power 100,000 vehicles a year including a new crossover model.
Facing the most profound technological shift in a century, the titans of the auto industry are racing to secure battery supply close to the factories where they will make the new cleaner electric vehicles of the future.
Nissan (OTC:NSANY) cast its backing for the 9 gigawatt-hour (GWh) plant as illustrative of a rejuvenation of Britain’s automotive industry which has for five years grappled with the fear that Brexit could cut off the rest of the European market.
“This project is the demonstration of the renaissance of the British car industry,” Ashwani Gupta, Nissan’s chief operating officer, told reporters at the Sunderland plant, which exports 70% of its vehicles to the EU.
British Prime Minister Boris Johnson said Nissan’s move was “a major vote of confidence in the UK and our highly skilled workers in the North East”. Nissan said Britain had backed the plan, but did not detail any guarantees or incentives granted.
The 1 billion-pound ($1.4 billion) investment by Nissan, its Chinese partner Envision AESC and local government in northeast England will create 6,200 jobs at the Sunderland plant and in British supply chains.
Nissan will spend up to 423 million pounds to produce a new-generation all-electric crossover vehicle at the British plant, where it already produces the LEAF electric vehicle and the Qashqai crossover SUV. The new vehicle has yet to be named.
As world powers try to slash carbon emissions by scrapping the fossil-fuel guzzling internal combustion engine, Britain has pledged to ban the sale of new diesel and petrol cars from 2030. Going electric, though, is hard.
China dominates the production of electric vehicle batteries and the processing of the core minerals such as rare earths used to make them, though the United States and Europe are trying to catch up.
Western leaders, including Johnson, are loath to sacrifice hundreds of thousands of automotive jobs – often in politically sensitive constituencies – by importing batteries from China, rather than manufacturing domestically.
And unless Britain can build both battery production and supply chains, it risks losing its four-decade reputation as the investor-friendly gateway of choice for top companies seeking to export to the rest of Europe.
Envision could invest an additional 1.8 billion pounds in the battery plant to expand generating capacity to up to 25GWh and create 4,500 new jobs in the region by 2030. There is potential on site for up to 35GWh.
“Industrial revolutions start with energy revolutions, and so with the green industrial revolution,” Zhang Lei, founder and Chief Executive of Envision Group, told Reuters. “We also want to build the supply ecosystem in the country – but you do need critical mass.”
Zhang said the battery plant would be happy to supply other major manufacturers and hoped that, once it expanded capacity, it would be able to export, including to Europe.
Nissan said its new crossover built in Sunderland, on the Alliance CMF-EV platform shared by partners Renault (PA:RENA) and Mitsubishi, would be exported to European markets.
Japanese capital has used Britain as a gateway to Europe since the early 1980s, when then Prime Minister Margaret Thatcher persuaded Nissan bosses to build a plant in the Sunderland on an old air force airfield.
As British automakers withered, Nissan flourished. Thatcher personally opened the plant in 1986 and was pictured sitting at the wheel of a Nissan Bluebird.
Japanese investors worried that the United Kingdom’s Brexit vote – which was particularly strong in Sunderland – would scupper their bets, though the worst ravages of a tumultuous no-deal Brexit were avoided.
The Brexit trade deal agreed with the European Union last year allowed the free trade of cars but with a dangerous twist about rules of origin – at least 40% of the value of a car has to be produced in the United Kingdom or EU to be sold in the bloc.
That requirement rises to 55% from 2027 – a crucial detail that would mean an imported battery, which can make up half the vehicle’s showroom sale price, would close off the European market to British-based car factories such as Nissan.
The new model takes Nissan’s total capital investment in the Sunderland plant past 5 billion pounds.
“This is not one shot, this is not one car, this is the plan and this is for 10 years’ engagement,” Guillaume Cartier, Nissan chairman for Africa, Middle East, India, Europe & Oceania, told Reuters.
Nissan’s Sunderland plant was one of the first in Europe to build electric vehicle batteries, though its stake in the joint venture was bought out by Envision AESC.
($1 = 0.7230 pounds)