Why UK could be back in frame for Tesla gigafactory

The UK could still get a Tesla gigafactory after CEO Elon Musk revealed that the company would be picking a location for a new European plant “towards the end of 2023”.

Previously, Musk chose Germany over the UK and was said to have avoided the UK because he was worried about the impact of Brexit on automotive trade.

This was despite the government working hard to persuade Musk of the UK’s potential, including offering multi-million-pound grants and a location in Somerset (subsequently taken by Tata Motors for its gigafactory in 2023).

Gigafactories are in big demand. They are a critical part of the global EV transition, producing the batteries for electric cars that millions of people will get into over the next decade. For a country, their development can mean billions in investment, resulting in potentially tens of thousands of jobs.

In Europe, this demand is particularly high, as nations seek to nurse their highly important – and influential – automotive industries into the battery age, with minimal impact on workforces.

As one of the largest producers of EVs globally, Tesla is now among the biggest developers of gigafactories and has locations across the US, Mexico, China and Europe. Its European plant is in Germany – known as Giga Berlin – and was first announced in 2019 as a multi-billion project.

The factory opened in March 2022, produces 500,000 vehicles a year and employs around 10,000 people. It’s been a great success for Germany, which had to compete against many other European countries all vying for Tesla’s investment, including the UK.

Has the UK charmed its way back?

There is reason to believe that, perhaps, UK prime minister Rishi Sunak may have finally managed to win over Elon Musk.

Positive signs emerged after both Musk and Sunak developed a slight ‘bromance’ during the government’s flagship AI conference at Bletchley Park. At the event, Musk and Sunak spent a lot of time together and this culminated with Sunak interviewing Musk live in front of business leaders.

During the interview, there were signs that perhaps Musk has not been quite as happy with “continental Europe” as previous reports have suggested. In one example, as Sunak and Musk discussed how to make the right environment for new businesses, Musk said: “I don’t quite know how it works in the UK – probably better than continental Europe” before talking about the need for proper incentives, suggesting that with high risk should come high reward. Sunak joked in response to Musk: “I think that was a very soft pitch for a tax policy.”

Earlier this month, on X, Musk also responded to a picture of them both, saying: “I know he is not popular among some of the public, but I was very impressed with Rishi Sunak – he is an asset to the UK.”

What stands in the way?

There is no denying that the two like each other, but at the same time, Musk also said he liked Macron. What could help get the UK over the line as the winner?

Money feels like the obvious way. Gigafactories take a huge amount of capital to build and, as we’ve seen with Britishvolt, without strong government backing, they can falter.

But it seems the UK government may have satisfied this demand, as ahead of the 2023 Autumn Statement, chancellor of the exchequer Jeremy Hunt announced new £4.5 billion funding for advanced manufacturing industries in the UK. A large part of this money is solely to attract companies like Tesla.

This funding will come as the government publishes a wide-ranging advanced manufacturing plan and the UK’s first battery strategy. The Business and Trade department has said this “will ensure we continue to place the UK at the forefront of global supply chains”. This will no doubt reassure Tesla executives.

Another worry for Tesla may also still be Brexit. As it stands, the automotive industry remains concerned about new 'rules of origin' tariffs coming in from 1 January 2024 on UK-EU car makers who cannot source most of their EV battery materials from within Europe.

The Society of Motor Manufacturers and Traders recently calculated that, without a solution to this problem, the price of EU-made electric cars in Britain would increase by £3400, while the price increase on cars going to the EU from the UK would be £3600. Not to mention the impact it would have on jobs.

However, the government is confident of a good outcome from negotiations. And if not, Business and Trade secretary Kemi Badenoch said the UK could create its own rules to bypass the issue.

What happens next?

If Tesla is confident the UK is its most viable partner for a new factory, the next steps for the car maker will be where and when.

There are already several sites ripe and ready for Tesla, including the Britishvolt site in Blyth – which remains shrouded in issues following its collapse earlier this year. Likewise, the West Midlands gigafactory project could provide an easy opening for Tesla to establish itself quickly.

When all this could happen is unknown, but given Musk’s comments earlier this year, one could presume an announcement is imminent. For the UK government, it would make sense for it to happen close to its announcement of a battery strategy and industrial plan – reinforcing a strong future for British automotive.

Tom Riley

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