The British government has offered JLR £500 million in subsidies to entice them to build a new battery plant in the United Kingdom, tempting them to stay in their home territory and away from a possible alternative facility in Spain. Chancellor Jeremy Hunt has offered the package from the Treasury, and it seems likely that JLR will soon take the package and establish their presence further in the UK.
The offer comes in a combination of cash and subsidies. There is a substantial cash grant at the core, intended to help develop the factory. There are also subsidies for energy costs for the factory and upgrades to the power and transportation networks in the area. Separate from the JLR proposal, the Government has made a proposal to their parent company Tata with a £300 million package for their Port Talbot steelworks in Wales, the only steel manufacturer in Britain that can create molten steel out of ore and raw materials.
The subsidies are part of a larger dance that the British government is trying to perform regarding economic development. There are three things all happening at once:
After the tariff borders that resulted from Brexit, there isn’t as much incentive for continental European automakers to build facilities in the UK; thus, the best hope is for domestic automakers like JLR and foreign automakers with long-standing British manufacturing sites, like Nissan’s Sunderland factory.
JLR is the largest home-grown automaker in Britain at this point, composed out of the last remnants of the government-owned British Leyland system. Although Defender and Discovery are assembled in Slovakia, with a highly-Slovakian supply chain, core assemblies like engines are still built in the UK at the Wolverhampton engine plant. Wolverhampton will also assemble electric drive units for future JLR EVs, but the batteries are the real long-term prize and the only way that JLR can easily expand job opportunities, and expand into new corners of Britain, during the electric transition.
At this point, most countries are tossing around subsidies for EV projects, and the automakers are aware – and they know they can play the global field for the best deal.
After Brexit, 40% of an EV’s parts by value have to be made in the UK or EU to avoid a 10% tariff when selling a Range Rover or Jaguar EV to the continent, with this rising to a hard requirement for European batteries by 2027. Many batteries are made in Asia right now, and shipped around the world to European auto factories to get installed in vehicles, meaning that EVs are less and less European than ever before. Quantifying this by value means that there’s a huge incentive to make these large assemblies and batteries in the UK.
Though JLR is still very much open to the Spanish site, the Government’s response to their call for subsidy is more or less what they were looking for, and unless something very major upends the teacups, it seems likely that they would proceed with the plan to open the Somerset facility.
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