Theresa May has signed off a £500m loan guarantee to Jaguar Land Rover to encourage the car company to build electric cars in the Midlands in one of her last big interventions before leaving Downing Street.
The UK prime minister, who held a meeting of car manufacturers at Downing Street on Monday, said the loan would help Britain’s biggest carmaker sell a new generation of electric cars to help the country meet its environmental commitments.
The funding package for JLR includes £500m from UK Export Finance as well as £125m from commercial lenders.
JLR announced this month that it intended to invest £1bn in building an electric version of the Jaguar XJ saloon at its factory in Castle Bromwich, West Midlands. The factory near Birmingham will be upgraded, safeguarding the existing 2,500 jobs at the site.
Mrs May, speaking at a roundtable event with executives from companies including Nissan, Aston Martin and Vauxhall, as well as energy groups Shell and BP, said the government was committed to supporting the car industry as it switches towards more electric vehicles.
The prime minister is rushing to announce legacy projects before her departure from Number 10 next week. The JLR deal is understood to have been put together by Greg Clark, the business secretary, who is not expected to remain in the cabinet if Boris Johnson becomes the next prime minister.
Mrs May used the event to make commitments to increasing electric vehicle use, including a plan for England to introduce mandatory electric car charging points in new homes. The government will also consult on “smart” charging technology to automatically charge parked cars when electricity prices are at a low.
Michael Gove, the environment secretary, has announced that the UK will end the sale of new petrol and diesel cars from 2040. The Labour party has been considering an earlier target, should it form the next government, although it is yet to make any formal announcement.
Those attending the Downing Street event agreed a commitment to the building of a Gigafactory — a large-scale battery technology factory for electric vehicles.
The plant at Castle Bromwich in the West Midlands will make electric Jaguar cars using battery packs from the company’s nearby site at Hams Hall and electric components from its Wolverhampton engine plant, but it will still rely on battery cells imported from Asia.
JLR’s announcement last month was seen as a vote of confidence in the UK, given that the company is shedding 4,500 jobs after falling to a loss last year. It comes amid widespread gloom in the UK car industry, with Honda and Ford both set to close sites in Britain next year.
The industry was approaching record levels of production only a few years ago but has been hit hard by the slump in diesel sales in the wake of the VW emissions scandal and uncertainty over Brexit.
Honda stunned workers this year with the decision to shut its Swindon factory in 2022, which will result in 3,500 job losses. It was the first car factory closure in more than a decade in Britain.
More misery was piled on autoworkers in June when Ford confirmed it would close its engine factory in Bridgend, Wales, next year.
Investment in the automotive industry almost halved last year — and is down nearly 80 per cent in three years — as manufacturers awaited the outcome of Brexit negotiations, leading to fears that the UK could fall behind in the race to develop the cars of the future.
With its reliance on complex international supply chains for sourcing components and as a significant exporter, the industry is seen as particularly vulnerable to a no-deal Brexit that results in tariffs and customs checks.
While demand for electric cars remains below 1 per cent of sales, the UK government has pledged to make the country carbon “net zero” by 2050, something that demands total electrification of the transport network.
While Nissan makes the electric Leaf in Sunderland, several companies have opted to build batteries or electric models outside the UK.
Jaguar previously chose to build its first electric car, the I-Pace, in Austria, citing a poor domestic supply chain. When Honda announced its plans to close its plant in Swindon it said it would focus on building electric and hybrid models in Japan.
The government said on Monday that it had already demonstrated its commitment to electric cars by investing in £274m in the Faraday Institute, which specialises in battery technology. The government also promised new “chargepoints” to provide pay-as-you-go credit card payments for car electricity.