Jaguar Land Rover owner Tata demands subsidy for steel plants
Fresh from his Brexit heroics, the PM should grab the bull by the horns in persuading JLR to stick with Britain and entice Tesla
JAGUAR Land Rover owner Tata has tied the construction of a gigafactory in the UK to a government bailout of its ageing steel mill in Port Talbot, leaving the battery factory project in doubt.
A Whitehall source told The Daily Telegraph that Tata has insisted it will not commit to building a UK battery factory to support electric car production until it secures further taxpayer support for its steel operations.
The Indian company has sought hundreds of millions of pounds in taxpayer cash to help adapt its steelworks in Port Talbot, South Wales, to produce carbon-neutral steel.
The Government has offered to provide £300m but Tata has been pushing for a much higher sum. Natarajan Chandrasekaran, Tata’s chairman, reportedly demanded as much as £1.5bn, or about half the cost of adapting to green steel production.
Combined with its demand for £500m to support the planned battery factory, Tata’s total demands for taxpayer support add up to £2bn.
The deal is further complicated by a parallel plea from Tata Steel’s rival, British Steel, which is owned by China’s Jingye. The Government was said to be close to agreeing a £300m funding package for British Steel five weeks ago, but no agreement has been forthcoming. Any enlarged deal for Tata is likely to draw Jingye back to the negotiating table for more cash.
Government support is also likely to anger rival car and steel makers that have funded green projects independently. Nissan received about £100m of taxpayer help to build a gigafactory to supply its plant in Sunderland but funded the majority of the £1bn project itself.
Meanwhile Celsa, a smaller steelmaker based in Cardiff, has used electric arc furnaces since the 1970s, largely decarbonising its processes itself.
Tata and other big steel companies have been emboldened to ask Westminster for extensive support because of much more generous deals available abroad. Last month the European Commission approved €460m (£408m) of aid from Spain’s government for a €1bn overhaul of a steel plant in Gijon.
In October, German authorities approved €1bn of support for steelmaker Salzgitter to use hydrogen in its processes to replace coal.
Tata is said to be deciding whether to base a battery factory for Jaguar Land Rover in either Britain or Spain.
Without locally produced steel or batteries, the British car industry hangs in the balance. Upgrading or building a car plant here will make less financial sense as local components become harder to come by and more expensive.
The Government is under pressure to come up with a response the US’S $369bn (£308bn) package of sweeteners for the green economy, with the EU promising a similar package of support.
The Government declined to comment. Tata declined to comment.
W‘Britain must pull out all the stops, or pull the plug on electric cars completely’
hat a week for Britain’s struggling electric car industry. First the remnants (if you can even call it that) of Britishvolt, a battery factory “start-up” with zero experience of building battery factories, were snapped up by a little-known New York-based investment outfit with, erm, no experience of building battery factories. Next came fresh questions about the future of electric van trailblazer, Arrival.
Now it turns out the Indian parent of the mighty Jaguar Land Rover has upped the ante in an elaborate, high-stakes game of “who blinks first” over plans to build a gigafactory in Somerset. Tata Motors is threatening to flounce off to Spain instead, unless it receives half a billion pounds of state aid to help bankroll the plant, according to the Financial Times.
Its tactics are tantamount to ransom and are particularly egregious given that Tata is one of the world’s great industrial powerhouses with deep pockets to match. It also owns Port Talbot steelworks and is demanding taxpayer money to keep the lights on there too.
You would think that such a major investor in Britain might behave more graciously, especially when it comes to important corners of this country’s industrial fabric, rather than holding a gun to ministers’ heads.
Yet the depressing reality is that having abandoned any notion of a homegrown car industry decades ago, the Government has little choice but to rely on the kindness of strangers if it wants to be competitive in electric cars. So that means either accepting JLR’S demands or launching a charm offensive to woo someone like Elon Musk with the know-how to build the infrastructure that will be required to support electrification.
Indeed, after Rishi Sunak’s Brexit heroics, the Prime Minister should grab the bull by the horns and make it his next mission to save the car industry before it is too late.
Other countries have rolled out the carpet for Musk. Germany was so desperate to team up with the mercurial uber-billionaire that it allowed Tesla to fell 420 acres (170 hectares) of forest to make way for its Berlin site, providing that every single tree that was cut down was replaced with three new saplings. Mexico will be next after Tesla announced plans for a $10bn (£8bn) factory in Monterrey.
Another 10 or so outside of the US could follow and there is no reason why Britain shouldn’t be next with some joined-up thinking, the right partners and the right incentives. Whether it is JLR, Musk or another serious player like Swedish battery giant Northvolt – Europe’s answer to Tesla – Britain must pull out all the stops, or pull the plug on electric cars completely.
There will be those who recoil at the thought of the Treasury bowing to Tata’s demands, but £500m is relatively small beer in the grand scheme of things, and on this occasion it probably pays to consider the bigger picture. The Government is rightly concerned about the consequences of failing to persuade JLR to stick around, both for electrification and foreign investment more widely.
A decision by JLR not to source batteries in the UK would be a devastating, and potentially fatal, blow to car making because it could have wider ramifications. If the big manufacturers cannot rely on the UK supply chain in the shift to electric vehicles then there is a reasonable chance that they could move lock, stock and barrel to places where they can.
In that sense, the UK finds itself at a crossroads – allow JLR to elope and the ripple effect could ultimately bring the curtain down on car making in Britain. With BMW considering shifting production of the all-electric Mini to China, and Nissan warning that Britain is becoming “more challenging” as a manufacturing base, the sector’s future is on a knife edge.
There’s also a danger that it sends a message that Britain isn’t a serious place to do business, at a time when it is already perceived pretty dimly among company bosses. Brexit has done serious damage to perceptions abroad, but if Jeremy Hunt does not abandon his tax crusade, these shores could become an investment no-go zone.
Astrazeneca’s decision to build a new factory in Dublin rather than the North West of England expressly because of the Treasury’s new punishing tax regime should have set off very loud alarm bells in Westminster. If that didn’t, then the prospect of JLR tearing up plans to make the UK the epicentre of its electrification programme certainly should. On the other hand, if Tata opts for Somerset over Spain, it could turn the tide and become the catalyst for a mini-wave of foreign investment in battery plants and other big industrial projects.
The Government wouldn’t really be writing a cheque, anyway. Any state aid package is expected to include various grants, but other support too, such as assistance with energy costs and research funding. It might also consider tax breaks; guarantees of smooth trade with the EU will be vital, too; and red tape needs to be torn up to attract serious figures such as Musk. These are things that the Windsor Framework can be a real platform for. But if ministers wanted to be really smart, they could also provide free land.
The Government needs to move quickly however. Joe Biden’s $360bn green deal bazooka has triggered a renewables arms race and Europe has countered with its own incentives to boost clean technology. The Chancellor has promised a response in the “next few months” but by then the drip-drip of investment out of Britain may have already turned into a flood.