Jaguar Land Rover owner Tata Motors is demanding more than £500 million in government aid for a new battery plant in Britain, in a decision set to be “crucial” for the future of the British car industry.
A person briefed on the discussions said the Indian group was close to choosing between Spain and south-west England for the plant and had given British ministers “weeks” to pledge financial support.
He added that the total value of UK aid that Tata wants exceeds £500 million, including grants and support packages such as assistance with energy costs and research funding.
The move, by the biggest employer in Britain’s car manufacturing sector, presents the government with a fundamental choice over support for the industry as Britain struggles to make the transition from petrol and diesel cars to mass-market electric vehicles.
A British government official said, “We . . . are involved – whether or not the negotiations go anywhere depends on whether a final amount can be agreed upon.
A decision by JLR not to source batteries in the UK will be a blow to the British car sector, damaging the country’s international attractiveness for investors, according to industry leaders.
“This is important. . . it will send an international seismic signal” if the Indian company chooses to build its factory outside the UK, said one person familiar with Tata Motors’ request for support from the British government.
The group has increased the amount of state support it wants since talks with the government began, people close to the talks said.
“This is very difficult for the government,” said one.
Tata is exploring a partnership with Chinese battery maker Envision that would involve building an Asian group and opening a factory in Somerset to supply JLR’s new electric cars.
PJ Balaji, the chief financial officer of Tata Motors, said last month that the Indian company was considering a site to make batteries “in Europe”.
Spain, Tata’s European alternative to the British site, has promised to build a battery factory from the German car company Volkswagen and the start-up Inobat.
JLR and Tata Motors, part of the Tata Group, declined to comment. Envision and the UK business department also declined to comment.
Despite recent investments by Nissan, Stellantis and Ford in electric vehicle technology, the UK has struggled to attract large battery companies to set up factories.
British car production fell last year to its lowest level since the 1950s, following the closure of the Honda plant in Swindon.
The government has set aside £850 million to attract battery manufacturers to the UK, and has a number of other financial support schemes that could attract investors.
Ministers have allocated more than £100 million to Nissan for electricity investment at its factory in Sunderland. Stellantis received around £30 million from the government to build electric vans in Ellesmere Port.
Britishvolt, a start-up that wants to build a battery factory in Northumberland, had been offered £100 million in state funding before it collapsed this year.
Compared to its rivals, JLR has been slow to launch its range of electric vehicles. The group currently has only one electric car – the Jaguar I-Pace, which is made in Austria by contract manufacturer Magna Steyr.
JLR says it will launch an electric Range Rover, its flagship model, next year.
JLR and Envision, which makes batteries for Nissan in Sunderland, came close last year to announcing a partnership to build a battery factory in Somerset.
But Tata delayed the announcement amid political turmoil as Boris Johnson was replaced as prime minister by Liz Truss and then Rishi Sunak.
The decision is also being held as the Tata Group has simultaneously sought UK government support for its UK steel business.
Ministers have offered around £300 million to try to save Tata’s Port Talbot steelworks.