The UK government has finalized a £1 billion (approximately $1.27 billion) funding deal to construct a new electric vehicle (EV) battery gigafactory in Sunderland, a move set to create 1,000 jobs and produce batteries for up to 100,000 EVs annually. Announced by Chancellor Rachel Reeves during a visit to AESC’s facilities on May 9, 2025, this initiative marks a significant step in strengthening the UK’s EV manufacturing sector, as reported by The Sunday Times.

AESC’s Third Gigafactory to Drive EV Growth

AESC, a Chinese-owned company under Envision, will build its third gigafactory in the northeast of England. The facility aims to increase the UK’s battery production capacity sixfold, addressing the growing demand for EVs. Currently, EVs account for about 20% of vehicle sales in the UK, according to the Society of Motor Manufacturers. The government projects this plant will support the nation’s EV targets, which mandate that 28% of vehicles sold in 2025 must be zero-emission, rising to 80% by 2030, with an extended phase-out of petrol and diesel cars to 2035.

Funding for the project includes £680 million (around $865 million) in loans from banks, backed by the National Wealth Fund and UK Export Finance, alongside £320 million (approximately $407 million) in new equity from AESC. The government’s Automotive Transformation Fund contributes an additional £150 million (about $191 million) in grants. This financial structure ensures the gigafactory’s development aligns with the UK’s decarbonization goals.

Technical Capacity and Economic Impact

The Sunderland gigafactory will manufacture batteries capable of powering 100,000 EVs each year, a substantial leap from the UK’s current capacity. AESC’s CEO, Shoichi Matsumoto, emphasized the project’s significance, stating, “This investment marks a key milestone in AESC’s ongoing efforts to support the UK’s path towards decarbonization and the expansion of its EV market.” The facility joins AESC’s existing plants, with the first opening in 2012 and the second starting construction in 2021, solidifying Sunderland’s role as a hub for EV battery production.

Economically, the plant promises to revitalize the northeast. Rachel Reeves highlighted the broader benefits, noting that the deal would “deliver much-needed high quality, well-paid jobs to the northeast, putting more money in people’s pockets.” Jonathan Reynolds, the business and trade secretary, added, “The deal was a yet another vote of confidence in the northeast’s thriving auto-manufacturing hub.” The creation of 1,000 jobs directly addresses regional employment needs while supporting the UK’s transition to sustainable transportation.

Industry Trends and Regulatory Context

The investment comes amid fierce competition in the EV battery sector, with European manufacturers facing challenges from Chinese rivals dominating the market and supply chains. The Swedish battery maker Northvolt, once a key player, filed for bankruptcy in March 2025, underscoring the pressure on Western firms. Meanwhile, the UK’s trade agreement with the US, finalized alongside this deal, reduces tariffs on vehicle exports from 27.5% to 10%. This adjustment will apply to 100,000 UK cars annually—about 1,000 fewer than last year’s exports to America—easing market access for British EV manufacturers.

Regulatory shifts also shape the landscape. In April 2025, the UK relaxed its zero-emission vehicle mandate, reducing fines for manufacturers failing to meet EV sales targets and extending the petrol and diesel phase-out to 2035. These changes provide breathing room for carmakers while maintaining pressure to transition to cleaner technologies.

Implications for EV Owners and Manufacturers

For EV owners and enthusiasts, the gigafactory ensures a more reliable domestic battery supply, potentially lowering costs and improving vehicle availability. Manufacturers benefit from reduced dependency on foreign supply chains, enhancing production stability. As the UK accelerates its EV adoption, this plant positions Sunderland as a cornerstone of the nation’s sustainable automotive future, balancing economic growth with environmental goals.