The chair of Tata Group is due to meet Prime Minister Rishi Sunak next week for talks that are expected to lead to the announcement that the Indian group will build a flagship electric car battery factory in the UK.
Ministers believe that the visit by Natarajan Chandrasekaran will lead to Tata picking a site in Somerset over a rival location in Spain to supply Jaguar Land Rover, its UK-based carmaker.
The Tata boss is set to meet Sunak for talks that will focus on the size of a state support package, according to one minister. Downing Street and Tata declined to comment, but one 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 not been finalised, the “hope” was that the gigafactory by the M5 motorway in Bridgwater would be announced very soon.
The choice, months in the making, has been swung by promises from ministers of a support package worth hundreds of millions of pounds that will include taxpayers subsidising the plant’s energy costs for years to come.
The Financial Times reported at the weekend that ministers were increasingly hopeful Tata would select the UK after making the energy subsidies offer late in the negotiations.
The decision would be give a big lift to the beleaguered UK auto sector, which has struggled to attract battery investments and seen car production almost halve over just three years. The Bridgwater plant would be only the second large battery factory in Britain after the gigafactory that supplies Nissan’s plant in Sunderland.
The selection of Somerset would also represent a boost for Sunak’s government, which has made the development of green industries a priority.
But it would also signal how Sunak has been drawn reluctantly into a global green subsidies race triggered by the US’s $369bn Inflation Reduction Act.
Tata is expected to receive grants for the construction of the site and funding for new road links, but the largest cost will be subsidising the energy use of the factory, which had been the critical factor driving Tata’s decision.
The Indian group originally asked for about £500mn in total financial support from the UK, though a final figure is difficult to calculate given the energy support element of the deal will run for many years.
Tata is also trying to extract more money from the UK government for its steel works at Port Talbot. Ministers have already offered £300mn to Tata’s steel operations to help them move to greener forms of steel production.
Executives, however, have dismissed that sum as too little given the estimated £2bn to £2.5bn capital expenditure needed to move the Port Talbot steelworks in Wales from blast furnaces to less carbon-intensive electric arc furnaces.
Executives have told officials that they are looking for similar levels of support offered to their European rivals, including half of the capex investment.
They also want a level playing field on energy costs, as well as a carbon border tax on imports of steel, similar to the carbon border adjustment mechanism agreed by the EU last year. Britain’s high energy costs, compared to continental Europe, have been a sticking point in negotiations.
Tata has been planning to build the factory with Chinese battery supplier Envision, the same group that operates Nissan’s plant.
JLR is due to release an all-electric Range Rover next year, one of a family of seven battery-powered cars as part of a £15bn electrification programme, as it aims to catch up with premium rivals such as Mercedes-Benz and BMW.
Chandrasekaran’s UK visit was first reported on Wednesday by the BBC.