Ford will spend £230m to turn its Halewood plant in Merseyside into an electric vehicle parts factory, the latest investment in the sector by an overseas carmaker.
The US group’s decision to set up production of electric power units in the UK from 2024 safeguards 500 jobs at the site. It is conditional on £30m of government funding, according to people familiar with the matter.
The move is also a boost for the UK car industry, which is preparing to phase out combustion engine vehicles at the end of this decade.
Ministers have set aside £500m in total to try to convince electric car and battery manufacturers to bring work to the UK to protect the country’s vehicle and component plants as the sector shifts away from petrol and diesel towards battery and hybrid models.
The UK has said it will end the sale of new petrol and diesel cars by 2035, with some hybrids allowed after 2030.
Business secretary Kwasi Kwarteng said Ford’s investment was “further proof that the UK remains one of the best locations in the world for high-quality automotive manufacturing”.
He added: “Today’s announcement, backed by government funding, is a huge vote of confidence in Britain’s economic future and our plans to ramp up electric vehicle production.”
The industry has warned it would need a significant number of battery factories and a large electric supply chain to support the current network of assembly plants if they turn to EV production.
Ford’s European president Stuart Rowley said the decision “reconfirms Ford’s continuing commitment to the UK”.
He said the move was “Ford’s first in-house investment in all-electric vehicle component manufacturing in Europe”.
Ford will make the same electric power units in Mexico, Michigan and China, and may in future set up other plants making the same part in Europe or expand its Halewood capacity to meet further demand, he told the FT.
Following the investment Halewood will have a capacity of 250,000 electric power units a year, while Ford sells around 1m vehicles across Europe annually.
Rowley added a decision about where to base battery factories in Europe is only months away, with the UK “always a candidate”, though the final decision will be made by Ford’s joint venture with battery supplier SKI. The FT reported earlier this year that SKI and Ford are in talks with the UK government.
From 2030, Ford will sell electric cars only in the UK and Europe, though it will continue to make some diesel vans after that date.
It will invest $1bn in its Cologne headquarters in Germany to produce battery models, but has otherwise given very few details of its plans to make electric cars in the region.
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The only fully electric model currently in its European line-up, the Mustang Mach-E, is imported from Mexico. Ford will launch its first Europe-built electric car in 2023.
The company has a technology sharing deal with Volkswagen that analysts believe may mean it will use VW’s electric car technology for some European models.
In the UK, Ford currently makes diesel engines at Dagenham that go into its Transit van, and transmissions at Halewood. It also has research and engineering facilities at Dunton in Essex.
The Merseyside plant will continue making its transmission parts for a short while once electric production has started.
Last year Ford closed its Bridgend plant in Wales. It made petrol engines that were largely supplied to Jaguar Land Rover, which has taken the work in-house.