In an effort to encourage Jaguar Land Rover (JLR) to establish a new electric battery facility in the UK, the government has given the company £500 million in subsidies.

Jeremy Hunt, Chancellor of the Exchequer, has proposed a package of incentives to attract JLR, only days after three major automakers warned that Brexit restrictions on where parts are sourced threatened the British automotive industry's existence.

Tata Motors, the parent company of JLR, is debating whether to build the new electric battery production plant in the UK or Spain. 

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According to The Times, the UK Treasury package includes a cash award and energy cost reductions, as well as funding to upgrade the power network surrounding the JLR complex in Somerset.

The government has also given Tata a £300 million plan to assist modernize and decarbonize its Port Talbot steelworks complex in south Wales.

Tata's chair, Natarajan Chandrasekaran, stated last year that if the company could not get large government subsidies to assist convert the plant's blast furnaces to greener manufacturing techniques, it would “have to look at closures of sites”.

The Port Talbot factory employs around 3,500 people and is one of only two in the UK capable of converting iron ore and coal into molten iron and steel. Tata Steel UK employs around 8,000 employees in total.

The £500 million pledge to JLR marks a significant commitment from the UK government, as the overall budget for its automotive transformation fund, which intends to promote the British car industry's transition to electric vehicles, is now just £1 billion.

If an electric car is to be sold on the opposite side of the Channel without a 10% trade levy, it must have 40% of its parts obtained in the UK or EU.

This share is expected to climb to 45% next year, while the barrier for battery packs will be 60%.

Because most electric vehicle batteries are still imported from Asia, and batteries account for a significant portion of the cost of producing a car, automobiles manufactured in the UK and EU are likely to violate the guidelines.

Stellantis, which owns the Vauxhall, Peugeot, and Citroen brands, stated on Wednesday that if the Brexit deal is not renegotiated, it may be forced to close some of its UK facilities.

Ford, which manufactures electric vehicles in Germany and parts in the United Kingdom, said the rule would add "pointless cost to customers wanting to go green”.

JLR, the UK's largest automaker, urged the UK and EU to “quickly agree on a better implementation solution to avoid destabilizing the industry’s transition to clean mobility.”