British ministers are increasingly hopeful of convincing Tata Motors to build a flagship battery factory in the UK, offering a last-minute offer of higher energy subsidies to secure a deal.
Rishi Sunak’s government has offered a series of incentives worth hundreds of millions of pounds to convince the company to build a battery site in Britain rather than Spain to supply Jaguar Land Rover’s electric cars.
But British officials believe the key will be deep discounts on the huge amounts of power needed to run a gigafactory, to be built in Somerset, as well as Tata Steel’s separate operation at Port Talbot.
A decision on Tata’s battery plant is imminent, according to people close to the discussions. One said a decision could come as soon as next week.
The company asked for 500 million pounds of financial assistance from the UK and heavily favored the Spanish site earlier in the year despite its historical links to the UK.
But a recent push led by Sunak has seen JLR’s Indian owners rebuild their Bridgwater plant, and British officials said a better offer had been put in on power prices.
“The situation has recovered,” said a minister. “He may still be in the UK.”
The deal has been seen as a binding deal by the government to support the UK’s faltering car industry as it you fight after brexit to pivot towards the manufacture of electric cars at scale.
Britain’s high energy prices compared to EU rivals have been the big sticking point and ministers are looking to increase subsidies to big power users like Tata through a new “Energy Supercharger” scheme. British”.
A consultation is underway on the scheme that would reduce the energy bills of 300 energy-intensive companies such as those that make steel and batteries. The new regime will be implemented from spring 2024.
Kemi Badenoch, energy secretary, has been leading talks with Tata on the new supercharger scheme; The design of it will have a crucial influence on the viability of both the proposed gigafactory and the Port Talbot Steel Works.
The cost of energy subsidies for heavy industry will eventually be financed through consumer bills. The total subsidy to Tata to build the gigafactory will depend on the generosity of the scheme.
The UK is also offering a one-time grant to Tata to build the battery factory with its £1bn. automotive transformation fundtogether with another grant to improve road links to the proposed site near the M5 motorway.
Those close to the deal say the offers made by the UK and Spain to build the battery factory are very similar, but the long-term cost of energy is likely to be the deciding factor.
“The fundamental sticking point is not the cost of construction, we have to get parity on that, it is about operating costs and the high cost of energy in the UK versus other markets,” said one insider. about the discussions.
The idea of linking a subsidy package for Tata’s battery factory and its Port Talbot steel works was agreed upon by Liz Truss during her brief tenure last year, in talks with Natarajan Chandrasekaran, chairman of parent company Tata Sons.
Tata Steel is expected to receive £300m to decarbonise its Port Talbot plant, a sum also earmarked for British Steel for its Scunthorpe plant, according to government sources.
Spain has tried to woo Tata by promising access to some of the billions of euros in EU grants and loans the country is receiving from the bloc’s post-Covid recovery funds.
With the aim in part of accelerating a transition to cleaner energy, Spain has already earmarked €3bn of Next Generation EU funds for electric vehicle projects. Tata has been considering a factory site in Aragon in the northeast of the country.
Analysis this year by UK Steel, the industry trade body, found that steelmakers were still paying 60 percent more for their electricity compared to German producers despite falling wholesale prices.
JLR will launch a fully electric Range Rover next year and a set of seven battery-powered cars as part of a £15bn electrification program as it aims to catch up with premium rivals such as Mercedes-Benz and BMW.
The battery plant is expected to be built together with China’s Envision, the same company that supplies Nissan with batteries for electric cars in Sunderland.
Tata declined to comment.
Additional reporting by Chloe Cornish in Mumbai