Tata boss meets Sunak for talks to secure JLR’s UK battery factory

The chairman of the Tata Group will meet Prime Minister Rishi Sunak next week and it is expected to be announced that the Indian group will build a flagship electric car battery factory in the UK.

Ministers believe Natarajan Chandrasekaran’s visit will result in Tata choosing a site in Somerset over a rival site in Spain to supply Jaguar Land Rover, its UK carmaker.

According to one minister, the Tata boss is meeting Sunak to discuss the size of the state aid package. Downing Street and Tata declined to comment, but a government insider said: “The mood is very positive.”

One senior Conservative said a deal was “imminent” and another minister said that while a deal had yet to be struck, the “hope” was that the gigafactory off the M5 in Bridgwater would soon be announced .

The election, which has been in the making for months, was decided by ministers’ promises of a support package worth hundreds of millions of pounds, which includes taxpayers subsidizing the plant’s energy costs for years to come.

The Financial Times reported at the weekend that ministers had grown hopeful that Tata would choose the UK after it made a late bid for energy subsidies.

The decision would give a big boost to Britain’s beleaguered car sector, which has struggled to attract battery investment and has seen car production almost halve in just three years. The Bridgwater plant would be only the second major battery factory in Britain after the gigafactory supplying Nissan’s Sunderland plant.

The selection of Somerset would also be a boost for Sunak’s government, which prioritizes the development of green industries.

But it also signals that Sunak has been reluctantly drawn into the global race for green subsidies launched by the US’s $369 billion Inflation Relief Act.

Tata is expected to receive subsidies to build the site and finance new road links, but the biggest cost is subsidizing the factory’s energy use, which was a critical factor in Tata’s decision.

The Indian group initially asked the UK for around £500m in total financial support, although the final figure is difficult to calculate as the energy subsidy element of the deal will last for many years.

Tata is also trying to extract more money from the British government for the port’s Talbot steelworks. Ministers have already offered £300m to Tata steel operations to help them switch to greener forms of steelmaking.

However, executives deemed the sum too small, given the £2bn to £2.5bn capital expenditure needed to switch the Port Talbot steelworks in Wales from smelters to low-carbon electric arc furnaces.

Executives have told officials they are seeking a similar level of support to their European rivals, including half the investment.

They also want a level playing field in terms of energy costs, as well as a carbon dioxide border tax on steel imports, similar to the carbon dioxide border adjustment mechanism adopted by the EU last year. Britain’s high energy costs compared to continental Europe were a sticking point in the negotiations.

Tata planned the construction of the factory with the Chinese battery supplier Envision, the company group that operates the Nissan plant.

JLR will release an all-electric Range Rover next year, one of a family 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.

Chandrasekaran’s visit to Britain was first reported by the BBC on Wednesday.