By Guy Faulconbridge and Paul Sandle
SUNDERLAND, England (Reuters) -Nissan Motor Co bet on Britain to supercharge its European electric future on Thursday, pledging $1.4 billion with its Chinese partner to build a giant battery plant that will power 100,000 vehicles a year including a new crossover model.
Facing the most profound technological shift in a century, the titans of the auto industry are racing to secure battery supply close to the factories where they will make the new cleaner electric vehicles of the future.
Nissan cast its backing for the 9 gigawatt-hour (GWh) plant as illustrative of a rejuvenation of Britain's automotive industry, which has for five years grappled with the fear that Brexit could cut off the rest of the European market.
"This project is the demonstration of the renaissance of the British car industry," Ashwani Gupta, Nissan's chief operating officer, told reporters at the Sunderland plant, which exports 70% of its vehicles to the European Union.
British Prime Minister Boris Johnson said Nissan's move was "a major vote of confidence in the UK and our highly skilled workers in the North East". Nissan said Britain had backed the plan, but did not detail any guarantees or incentives.
The 1 billion-pound ($1.4 billion) investment by Nissan, its Chinese partner Envision AESC and local government in northeast England will create 6,200 jobs at the Sunderland plant and in British supply chains.
Nissan will spend up to 423 million pounds to produce a new-generation all-electric crossover vehicle at the plant, where it already produces the LEAF electric vehicle and the Qashqai crossover SUV. The new vehicle has yet to be named and there is no launch date.
ELECTRIC FUTURE
As world powers try to slash carbon emissions by scrapping the fossil-fuel guzzling internal combustion engine, Britain has pledged to ban the sale of new diesel and petrol cars from 2030.
Going electric, though, is hard.
China dominates the production of electric vehicle batteries and the processing of the minerals used to make them, though the United States and Europe are trying to catch up.
Western leaders, including Johnson, are loath to sacrifice hundreds of thousands of automotive jobs - often in politically sensitive constituencies - by importing batteries from China, rather than manufacturing domestically.
And unless Britain can build both battery production and supply chains, it risks losing its four-decade reputation as the investor-friendly gateway for top companies seeking to export to the rest of Europe.
Envision could invest an additional 1.8 billion pounds in the battery plant to expand generating capacity to up to 25GWh and create 4,500 new jobs in the region by 2030. There is potential on site for up to 35GWh.
"We also want to build the supply ecosystem in the country - but you do need critical mass," Zhang Lei, Envision Group founder and chief executive, told Reuters.
Zhang said the battery plant could supply other manufacturers and hoped that, once it expanded capacity, it would be able to export, including to Europe.
Still, Britain is far short of the installed battery capacity it will need to power electric cars in the long term and there are risks the technology will be superseded.
"Battery development and production is currently in a complete state of flux - chaos even," said Bob Hancké, associate professor of political economy at the London School of Economics. "Any investment now runs the risk of closing of technologically more advanced options a few years from now."
Nissan said the new crossover, to be built on the Alliance CMF-EV platform shared by partners Renault (PA:RENA) and Mitsubishi, would be exported to European markets.
BREXIT
Japan's capital has used Britain as a gateway to Europe since the early 1980s, when then Prime Minister Margaret Thatcher persuaded Nissan to build a plant in Sunderland on an old airfield.
Japanese investors worried the Brexit vote - which was particularly strong in Sunderland - would scupper their bets.
A new trade deal agreed with the EU last year allows the free trade of cars but with a dangerous twist about rules of origin - at least 40% of the value of a car has to be produced in the United Kingdom or EU to be sold in the bloc.
That requirement rises to 55% from 2027 - a crucial detail that would mean an imported battery, which can make up half the vehicle's sale price, would close off the European market to British-based car factories.
The new model takes Nissan's total capital investment in the Sunderland plant past 5 billion pounds.
"This is not one shot, this is not one car, this is the plan and this is for 10 years' engagement," Guillaume Cartier, Nissan chairman for Africa, Middle East, India, Europe & Oceania, told Reuters.
($1 = 0.7230 pounds)