The owner of the UK’s only operating gigafactory has secured £1bn in funding for a new electric car battery plant in Sunderland, in a government-backed deal that secures the future of a key project for the struggling British car industry.
The funding will allow Japan’s AESC to install tooling and start production of batteries at the site, which is being built to serve Nissan’s car factory down the road. More than 1,000 people are expected to be employed there.
The National Wealth Fund and UK Export Finance, both state bodies, will provide financial guarantees that unlock £680m in financing for the battery maker. A further £320m in debt funding will come from private financing as well as new equity from the business.
The chancellor, Rachel Reeves, who was in Sunderland for the announcement, said the deal would boost British industries’ resilience and encourage growth. “This investment in Sunderland will not only further innovation and accelerate our move to more sustainable transport, but it will also deliver much-needed high quality, well-paid jobs to the north-east,” she said.
AESC already owns a Sunderland factory capable of making car batteries with cumulative capacity of 1.8 gigawatt hours (GWh) a year. The existing gigafactory supplied batteries for Nissan’s electric Leaf.
The Japan-based, part-Chinese-owned company, formerly known as Envision, first announced a huge expansion plan in 2021 to as much as 38GWh, in two phases.
However, the project has not proceeded as quickly as planned, and has been scaled back from those aggressive predictions as carmakers have come up against slower-than-expected growth in demand for electric cars. The first phase of building is now expected to be capable of 15.8GWh of batteries a year, enough for about 300,000 electric cars. The plant will supply the new version of Nissan’s Leaf.
A second phase of building has not proceeded beyond the feasibility study stage.
The funding for AESC to proceed with the first phase will be a relief for the business secretary, Jonathan Reynolds, who was born near Sunderland. He described the investment as “yet another vote of confidence in the north-east’s thriving auto manufacturing hub”.
The news came just a day after the UK and the US agreed a trade deal that dramatically reduced Donald Trump’s tariffs on imports of cars, as well as aluminium and steel.
The US has agreed to cut the tariffs on up to 100,000 British cars to 10%, down from the 27.5% rate Trump initially announced. The US is the main export market for British cars, worth more than £9bn in 2024.
Keir Starmer, appearing at a Jaguar Land Rover factory in the West Midlands on Thursday, said the deal would protect British businesses and “save thousands of jobs”.
The new AESC plant in Sunderland is expected to be able to provide up to 15.8GWh battery supply when it operates at full capacity. That will represent an increase of almost six times on the current level of UK gigafactory capacity.
The National Wealth Fund’s financial guarantee to AESC will replace an initial £200m short-term bridging loan that it announced in January 2024, before it transitioned from UK Infrastructure Bank to its current structure.
The fund, which was launched by Reeves last year, is designed to help projects such as ports, gigafactories, hydrogen and steel. The Leeds-based fund has £27.8bn that it can use to offer loans and make equity investments and financial guarantees.
