The government has offered Jaguar Land Rover a £500m subsidy in an effort to persuade the carmaker to build a new electric battery plant in the UK.
The chancellor, Jeremy Hunt, has offered a package of incentives to lure JLR, days after the three global carmakers warned that Brexit rules on which parts are taken away threaten the future of the car industry in Britain.
Indian conglomerate Tata, the parent company of JLR, is in the process of deciding whether to build a new electric battery production facility in the UK or Spain.
The Treasury package includes a mix of cash grants and reductions in energy costs as well as covering the cost of upgrading the power network around the site identified by JLR in Somerset, according to the Times.
The government has also offered its parent company, Tata, which also owns UK businesses including Tetley Tea, a £300m package to help upgrade and decarbonise its steelmaking facility in Port Talbot in south Wales.
Last year, Natarajan Chandrasekaran, Tata’s chairman, said that if the group did not negotiate significant subsidies from the government to help switch the plant’s blastfurnaces to greener production methods it would ” site closures should be looked into”.
The Port Talbot site employs around 3,500 people and is one of only two plants in Britain capable of turning iron ore and coal into molten iron and steel. In total, the subsidiary Tata Steel UK employs about 8,000 people.
JLR’s £500m offer represents a major commitment from the UK government, along with the overall budget for its automotive transformation fund, which aims to support the British car industry’s transition to de- electric car, which is currently just shy of £1bn.
Post-Brexit rules require 40% of electric vehicle parts value to be sourced in the UK or EU if they are sold on the other side of the Channel with less than a 10% trade tariff.
This proportion is due to increase to 45% next year, while for battery packs the threshold will be 60%.
Because most electric car batteries are still imported from Asia, and batteries make up a large part of the cost of building a car, cars made in the UK and the EU tend to fall by the rules.
On Wednesday, Stellantis, which owns the Vauxhall, Peugeot and Citroën brands, said it could be forced to close some of its UK operations if the Brexit deal is not renegotiated.
Ford, which makes electric cars in Germany and parts in the UK, said the requirement would add “unnecessary costs to customers who want to go green”.
JLR, the UK’s largest automotive employer, called on the UK and EU to “quickly agree on a better implementation solution to avoid destabilizing the industry’s transition to clean mobility”.