Exclusive-UK in advanced talks with Nissan over Sunderland plant support, sources say

By John Geddie, Maki Shiraki, Daniel Leussink and Alistair Smout

TOKYO/LONDON, June 18 (Reuters) - The British government is in advanced talks with Japanese carmaker Nissan about providing it financial support in return for a long-term commitment and investment in its Sunderland plant, five sources with knowledge of the discussions said. 

Any funding for the struggling automaker will be connected to its commitment to produce new models or variants and protect jobs at the country's biggest car plant, two of the sources said. It could come in the form of grants, tax breaks or subsidies, they said, declining to disclose amounts.

Nissan, the top car producer in Britain, is undertaking a major global restructuring that includes selling or closing other factories, cutting 15% of its workforce and shrinking its product lineup.

That has left lingering doubts over the outlook for its only remaining European assembly plant, which employs about 6,000 workers in England's industrial northeast.

Adding to the uncertainty, Nissan this month said it had signed a pact with Chery to study manufacturing the Chinese carmaker's vehicles using one of the two lines at Sunderland.

The plant produced more than 35% of cars made in Britain last year, according to the Society of Motor Manufacturers and Traders (SMMT), making it the backbone of a shrinking domestic auto industry.

Nissan agreed in 2023 to invest £1.12 billion ($1.49 billion) in Sunderland with government backing to build more electric vehicles, but demand for them has since lagged industry expectations.

The new commitment by Nissan is expected this summer and will be timed to coincide with Britain's confirmation of its plans to ease rules that force automakers to produce more EVs that are currently under consultation, two of the sources said.

Representatives from the British government and Nissan met last weekend in London on the sidelines of Japanese Prime Minister Sanae Takaichi's visit to the UK, one of the sources said. The sources all declined to be named due to the sensitivity of the matter, and stressed that final terms were still in flux.

Nissan declined to comment on the discussions but said in an emailed statement it had "a strong and collaborative relationship with the UK government" and looked forward to continuing to work together.

A UK government spokesperson also declined to comment on the talks but said the carmaker was "an important and long-standing partner".

Britain is committed to its so-called zero-emission vehicle (ZEV) mandate to phase out petrol and diesel cars but is open to reviewing it to ensure "a pragmatic and balanced approach", the spokesperson added.

WATERING DOWN EV RULES

Britain is consulting carmakers over plans to water down its ZEV rules that require them to hit EV sales targets or face punitive fines, two of the sources said.

Those changes would provide Nissan with room to produce more hybrid vehicles at the plant, in line with consumer preferences. 

Nissan CEO Ivan Espinosa in April unveiled the new electric Juke SUV to be built at Sunderland, while also pledging to expand powertrain options in its models.  

Under current rules, EVs are required to account for 33% of automakers' UK new car sales in 2026, though they can use credits and flexibilities to comply. Year to date, EVs have made up just under 24% of new car sales, well short of that target. 

By 2030, EVs must account for 80%, a target the car industry wants lowered to 50%.

Britain's review of its ZEV rules comes six months after the European Union proposed dropping its 2035 ban on fossil-fuel vehicles under pressure from automakers that argued it was an overly ambitious goal. 

Britain and its car industry are also lobbying the EU to be included in the bloc's "Made in EU" proposal ‌setting local content requirements for EVs. Around 60% of the cars produced in Britain are exported to the EU.

UK car lobby group SMMT argues that being shut out of "Made in EU" poses a threat to Britain's car industry.

($1 = 0.7511 pounds)

(Reporting by John Geddie, Maki Shiraki and Daniel Leussink in Tokyo and Alistair Smout in London; Editing by Jamie Freed)