This article is more than 1 year old

This article is more than 1 year old

Jaguar Land Rover is to build an electric version of the Jaguar XJ saloon at its Castle Bromwich factory, in a boost to the embattled automotive industry.

Britain’s largest carmaker will invest billions of pounds in creating a blueprint for the new vehicle and upgrading the plant on the outskirts of Birmingham, safeguarding the jobs of 2,500 people.

The last of the current XJ model will roll off the factory lines on Friday before the company switches production to the new model over the summer. JLR, which is owned by India’s Tata, had previously pledged to create electric versions of all its models by 2020.

Workers at the plant last month voted in favour of a four-day week amid a £2.5bn cost-cutting drive. The company is in the process of cutting 4,500 management jobs across its global workforce.

Ralf Speth, the JLR chief executive, said the company was locating electric vehicle manufacture, electronic drive units and battery assembly together near Coventry “to create a powerhouse of electrification in the Midlands”.

JLR has built a battery assembly plant at Hams Hall, between Coventry and Birmingham, which could make up to 150,000 units a year – equivalent to one-third of JLR’s 2018 output from the UK of 449,000 cars.

However, in the absence of a major UK manufacturer, Hams Hall will import cells for its batteries from Asia.

On Friday JLR called for the creation of multiple “gigafactories” in the UK to provide the large volumes of battery cells it will need.

Speth said battery production was crucial for the future of the UK car industry. “One thing is clear, if batteries go out of the UK then also the automotive production will go out of the UK.”

JLR is in talks with battery manufacturers thinking of building a facility in the UK. However, Speth declined to commit to buying batteries from a British gigafactory.

He said the rapid increase in demand for batteries from the automotive sector would probably push up prices for the foreseeable future.

“Jaguar Land Rover is really very much interested to have a battery factory in the UK, but it also has to be the next generation of batteries and it’s also quite clear it has to be a cost-competitive battery,” Speth said.

Buying British-made batteries would be an attractive prospect for JLR, given that it makes the majority of its cars in the UK. The automotive battery industry is currently dominated by Asian manufacturers, such as China’s CATL and South Korea’s LG Chem, but importing the temperature-sensitive components costs time and money.

The business secretary, Greg Clark, said the UK was “now perfectly placed to host a gigafactory and we are determined to realise that ambition”.

The all-electric Jaguar XJ is not the first car powered solely by a battery that the carmaker has produced. However, its I-Pace SUV is manufactured in Austria by Magna Steyr, a contractor.

The Castle Bromwich plant, which builds the cheaper Jaguar XE and XF saloons and the F-Type sportscar, will have the ability to switch quickly between all-electric, hybrid, petrol and diesel versions of the XJ. Other carmakers have adopted a similar strategy to hedge against uncertainty over demand from consumers for different fuel types.

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In common with other carmakers with significant British operations, JLR is keen to avoid a no-deal Brexit, which would probably result in tariffs on its imported components.

JLR has been particularly hit by the slump in demand for diesel cars – which are expected to account for about two in five of the company’s sales this year – after the backlash triggered by Volkswagen’s emissions-cheating scandal. Speth said the “demonisation” of diesel “really hurt us very much”.

At the same time, car sales in China – the key growth market for the global automotive industry – fell last year for the first time in nearly three decades.

JLR was forced to take a £3.1bn accounting writedown in the last quarter of 2018 after admitting its investments in China were worth much less than planned, resulting in its worst annual loss.