Following the news that Nissan is to invest in more battery production at its UK production hub in Sunderland;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:

“There are a number of big decision-making drivers here for Nissan, partly industry trends driven and partly specific to the circumstances of the plant in the UK.

“For the automotive industry, it is very clear that we are seeing a transformative energy transition from the prevalence of the internal combustion engine (ICE) to electrified and battery electric vehicles (BEVs). All vehicle manufacturers must address that fundamental shift over the next decade and that means both introducing new electric vehicles and ensuring supply chain capabilities for key components such as batteries.

“High-value lithium-ion batteries are, by their nature, heavy and vehicle manufacturers want to avoid long-distance logistics, preferring to manufacture the battery packs close to the vehicle manufacturing and final assembly plant.

“However, there are also important UK-specific factors at work in Nissan’s decision. The Nissan plant in Sunderland is heavily geared to supplying customers in the EU. From 2024, under the terms of the UK-EU’s Brexit trade deal struck at the end of last year, rules of origin requirements are raised and they get ratcheted up further thereafter. That means to qualify for tariff-free circulation in Britain, local content (UK and EU sourced components) needs to be higher than currently on electric vehicles made by Nissan in Britain. Nissan will prefer to meet that requirement with UK-made batteries rather than the alternative of long-distance import from potential suppliers on the continent.

“How much support from the UK government has Nissan factored in? That’s difficult to measure right now, but the UK has set an ambitious target for decarbonising its economy (with no pure ICE vehicles on sale from 2030) and the UK government has stressed the need for ‘levelling up’ the economic position of regions across the UK. Nissan’s Sunderland plant is a core economic asset in the relatively underprivileged northeast of England. There can be little doubt that London will give a huge welcome for this Nissan announcement and will have wanted to do anything it could to get that investment over the line. Nissan has been in a sweet spot for any negotiations on support measures.

“However, as the industry transitions to BEVs from today’s low market penetration (currently under 10% of new car sales for BEVs in Britain) there is still a long way to go for the UK in terms of being globally competitive and having sufficient supply chain manufacturing capacity – especially in batteries – to meet the vehicle manufacturers’ needs. Today’s Nissan announcement is a start. Make no mistake though, the UK is faced with very serious competition from future high-volume factories across the English Channel.”