India’s Tata chooses UK for $5b Jaguar Land Rover gigafactory

India’s Tata Group will build an electric vehicle battery plant in Britain to supply its Jaguar Land Rover factories, delivering a major boost for a car industry in need of domestic battery production to help secure its future.

The announcement marks Britain’s biggest move in the car gigafactory space as it seeks to keep up with the United States and European Union in the race to develop green industries.

Tata said on Wednesday it would build its first gigafactory outside of India with an investment of 4 billion pounds ($5 billion), creating up to 4,000 jobs and producing an initial output of 40 gigawatt hours.

Prime Minister Rishi Sunak’s government has declined to say how much financial support it promised in order to secure the investment and fend off Spain, which had also lobbied to win the project. The BBC said the government would provide subsidies worth hundreds of millions of pounds to Tata.

Britain has lagged European rivals in building electric vehicle (EV) battery gigafactories, with more than 30 planned or under construction across the EU. Britain currently has one small Nissan plant and another in the works.

“Tata Group’s multi-billion-pound investment in a new battery factory in the UK is testament to the strength of our car manufacturing industry,” Sunak said in a statement.

The new plant is expected to be built in Somerset, south-west England, while Jaguar Land Rover’s UK factories near Birmingham, in central England.

Domestic production is vital for automakers which rely on heavy batteries being built near their car plants.

Production is due to start in 2026 to supply JLR’s future battery electric models, including the Range Rover, Defender, Discovery and Jaguar brands.

With an initial output of 40 gigawatt hours, Britain said the factory would provide almost half of the battery production needed by 2030. The Faraday Institution predicts Britain will need more than 100 GWh a year by that time.

“With this strategic investment, the Tata Group further strengthens its commitment to the UK,” Tata Sons Chairman N Chandrasekaran said in the statement.

The investment comes as Britain seeks to deepen ties with India, with talks over a free trade deal described as being at a critical stage.

Industry figures welcomed the announcement as a lifeline to a sector that otherwise risked being left behind as other countries offer subsidies to support electric carmakers.

Under net zero goals Britain plans to ban the sale of new petrol and diesel cars from 2030.

But automakers will also need to source more EV components locally to avoid tariffs on UK-EU trade from 2024 under Britain’s trade deal with the bloc.

Major automakers including Vauxhall-owner Stellantis and Ford warned in May that the looming rules risked making Britain unviable for future investment, prompting the government to say it was trying to ease them.

The failure of an EV startup, Britishvolt, in January also underlined the difficulties of establishing a home-grown industry amid a shortage of suitable sites.

Companies that could benefit in a gigafactory supply chain urged the government to go further and ensure they were given the support needed to compete.

“We can’t afford to have this state-of-the-art plant and then farm out large parts of the component and sub-contract value to overseas suppliers,” said Tony Hague, CEO of manufacturing outsourcer PP Control & Automation.

“If we can get this right, then the actual positive impact will be way more than the 4 billion pounds going into Somerset.”

Britain has previously expressed concerns over the United States’ promise of hundreds of billions of dollars in subsidies for green industries.

Finance minister Jeremy Hunt, who has said that Britain will not go toe-to-toe on subsidies, declined to give details on any UK financial support for Tata but acknowledged Britain’s need to attract big projects.

“We’re in competition with countries all over the world for these big investments,” he said.

Andy Palmer, former CEO of Aston Martin and current chairman of EV battery maker InoBat, said government subsidies were needed to keep Britain competitive.

“Almost every car producing nation in the world (is) offering a lot of incentives in order to ensure that they preserve the integrity of their car industry,” he told BBC Radio.

Tata’s Chandrasekaran thanked the government for working “so closely with us to enable this investment.” Shares in Tata Motors shares rose nearly 2 per cent, outshining the broader index in India which was up 0.1 per cent.