Japanese electric-vehicle battery maker AESC has announced a £1 billion government-backed funding deal that will allow it to proceed with delayed expansion plans in Sunderland.

The funding is to allow the Yokohama-based company, which is part-owned by China’s Envision, to install tooling and begin production at a planned EV battery plant to serve Nissan’s nearby car factory.

The new plant is expected to generate more than 1,000 jobs.

Delayed plans

The National Wealth Fund and UK Export Finance are to provide financial guarantees that unlock £680m in financing for the project, with a further £320m in debt funding provided by private financing as well as new equity from the business.

Financing is provided by banks including Standard Chartered, HSBC, SMBC Group, Societe Generale and BBVA.

The National Wealth Fund’s financial guarantees replace an initial £200m short-term bridging loan announced in January of last year, before the organisation shifted from the UK Infrastructure Bank to its current structure.

“This investment in Sunderland will not only further innovation and accelerate our move to more sustainable transport, but it will also deliver much-needed high quality, well-paid jobs to the north-east,” said chancellor Rachel Reeves, who was in Sunderland for the announcement late last week.

Business secretary Jonathan Reynolds, who was born near Sunderland, said the investment was “yet another vote of confidence in the north-east’s thriving auto manufacturing hub”.

EV capacity

AESC’s existing gigafactory in Sunderland supplied batteries for Nissan’s electric Leaf, with cumulative capacity of 1.8 gigawatt hours (GWh) per year.

The company in 2021 announced massive expansion plans for the Sunderland battery operations up to as much as 38GWh, in two phases, but those plans have since been scaled back amidst slower-than-expected EV demand growth.

The first phase of the new plant is now expected to provide 15.8GWh of annual capacity, enough for 300,000 EVs, for a new version of Nissan’s electric Leaf – a massive expansion in capacity over the current plant.

A second phase remains at the feasibility study stage.

Nissan announced a major investment into its Sunderland plant in 2023 to build electric versions of two of its cars.