LONDON (Financial Times) -- Nissan is in advanced talks with the UK government to build a battery gigafactory, under a post-Brexit plan to make Britain the company's largest electric car production hub outside Japan.
The new factory at Nissan's existing Sunderland site would be run by Nissan's Chinese battery maker Envision AESC, and support the production of 200,000 battery cars a year as well as thousands of jobs, according to three people briefed on the private discussions.
Talks began in earnest after Britain's Brexit deal with the EU, and a possible announcement is currently slated for the summer, ahead of Britain hosting the COP26 climate summit this year.
Nissan wants significant financial support worth at least tens of millions of pounds from the government for the project, including a route to lower its energy costs for producing the batteries, two of the people added.
Securing gigafactory investment is crucial to support the future of Britain's car plants, as the industry races to produce electric vehicles to comply with carbon targets, and governments across Europe compete to lure battery makers.
The industry's trade body, the Society of Motor Manufacturers and Traders, has called the need to secure battery investment "essential".
The UK suffered a blow two years ago when Tesla opted to build a new plant in Germany. A recent trip to the UK by Tesla chief executive Elon Musk stoked speculation that the California carmaker might still open a UK gigafactory, but people involved with the government's various battery talks said they were unaware of any live discussions.
However, the UK government is in talks with several other potential gigafactory investors, with Nissan's project the most advanced, two of the people said.
A spokesman for the government's business department declined to comment on specific plans, but added: "We are dedicated to securing gigafactories, and continue to work closely with investors and vehicle manufacturers to progress plans to mass produce batteries in the UK."
The Japanese carmaker already makes batteries for the Nissan Leaf, the best selling electric model in Europe, at a dedicated Envision-run facility adjacent to its Sunderland plant where it manufactures the model.
Nissan used to make batteries in-house at the site in a joint venture, but sold its stake of the global battery factories to Chinese group Envision in 2019.
This year, Nissan announced plans to bring production of a larger battery for the Leaf to the UK from the US, to help it comply with trading rules after Brexit.
But with the UK phasing out the sale of new pure petrol and diesel models by 2030 and carmakers facing tighter CO2 rules across Europe, electric sales are expected to rise sharply this decade.
During the first phase of the new project, the site will produce 6 gigawatt hours of battery capacity per year and should open towards the end of 2024, rising to 18-20GWh once the final project is complete, two people said.
The site will dwarf the current Sunderland battery plant, which has a capacity of 1.9GWh, although it will be smaller than Tesla's 35GWh gigafactory in Nevada.
Nissan wants the UK, where it first opened its plant in 1986, to be the dominant electric car production centre after its Tochigi plant in Japan. The replacement for the Nissan Leaf, a family-sized car, will be made both in Japan and, if the gigafactory goes ahead, in the UK, the people said. Nissan has told partners it expects the Leaf replacement to dominate global sales.
Added battery capacity will also pave the way for Sunderland to win more electric models in the future, as Nissan increasingly shifts its line-up away from the combustion engines that have dominated the industry for a century.
This month, Nissan's operations chief Ashwani Gupta said that Sunderland is "one of the best plants in the world for Nissan in terms of competitiveness", but that the plant would only win future work if it was sufficiently competitive compared with other sites.
The group previously warned that a post-Brexit arrangement that involved tariffs and border checks would "jeopardise" its operations at Sunderland, although it has since welcomed Britain's trade agreement with the EU.
Gupta also said the company aims to get battery production costs below $100 per kWh. "More and more, we have to make the battery competitive," he told the FT's Future of the Car summit.
Nissan said its Sunderland plant had "played a pioneering role in developing the electric vehicle market" but the company had "no further plans to announce at this time".
A spokesman for Envision said it manufacturers the current Nissan Leaf battery but has "no further plans or comments to make at this time".