Government officials have privately warned that Jaguar Land Rover (JLR) would have considered relocating car production out of the UK and cutting jobs if not for a £380 million subsidy awarded to its sister battery company, Agratas. The revelation comes from state aid documents prepared by the competition regulator, which shed light on the government's concerns over the future of Britain's largest automotive employer.
Subsidy Details and Investment Increase
The Department for Business and Trade (DBT) cautioned in December that JLR's potential departure could trigger an exodus from the UK car industry. The documents, obtained by the Competition and Markets Authority (CMA), show that the total planned investment for the Agratas battery gigafactory in Somerset has risen to £5.2 billion, up from the initial £4 billion announced in 2023. The government extended a £380 million grant to Agratas, a new business owned by Tata Sons, the Indian conglomerate that also controls JLR and Tata Steel. Tata Steel previously received £500 million to upgrade its Port Talbot steelworks.
Threat of Relocation to Spain
The documents reveal that without the subsidy, Agratas could have located its European factory in Spain. This, in turn, would have placed JLR at a systemic disadvantage, as it would be cheaper to manufacture electric vehicles closer to the battery plant. The DBT stated: "Over time, this systemic disadvantage could lead JLR to relocate its vehicle production closer to the counterfactual battery plant in Spain, resulting in significant job losses at JLR's UK vehicle production and its wider supply chain."
JLR currently employs 33,000 people in the UK, producing flagship models like the Range Rover and forthcoming Jaguar vehicles in Solihull, West Midlands, as well as the Discovery Sport in Halewood, Merseyside. A JLR spokesperson responded: "JLR is committed to manufacturing in the UK. We did not suggest moving our vehicle production to Spain during discussions with government about the location of the gigafactory."
CMA Scrutiny and Union Support
Under UK law, any government authority awarding sums over £25 million must consult the CMA's subsidy advice unit. However, the unit expressed doubts about whether the government's dire assessment of the British car industry's future was sufficiently justified. The CMA wrote: "The assessment should provide more reasoning and evidence to support its conclusion that JLR potentially relocating its production could contribute to a scenario where the majority of current UK automotive production leaves the UK."
A government source noted that the assessment considered a hypothetical counterfactual that did not materialise, and the threat of JLR leaving remains uncertain. The Land Rover and Jaguar brands are luxury vehicles that heavily rely on their British heritage. Des Quinn, a national officer for the Unite union representing JLR workers, said: "It's good to see that the government were on the right side to support the UK car industry."
Industry Reactions and Future Outlook
Senior JLR executives have previously stressed Tata's commitment to the UK, though the company manufactures some models exclusively abroad, such as the Land Rover Defender built in Slovakia. Andy Palmer, former chief operating officer at Nissan and former CEO of Aston Martin, commented: "It is the nature of car companies to seek the lowest total cost of delivery. This naturally includes access to grants, and inevitably their shareholders demand that alternatives are sought and competitiveness is proven." Palmer, now heading Palmer Energy Technology, added that the UK's approach to subsidies "needs root and branch renovation" and should support the entire ecosystem, not just the biggest names.
JLR has been slower than some rivals to produce electric cars, delaying its electric Range Rover and the launch of Jaguar as an all-electric brand. Sales of the electric Range Rover are expected to start this year, while orders for the first new Jaguar will begin in 2027. A government spokesperson stated: "We value JLR's commitment to manufacturing in the UK. Our £380m subsidy to Agratas will increase UK domestic battery production and keep us at the forefront of the transition to zero-emission vehicles." Agratas declined to comment.
