There are two important contexts into which Jaguar Land Rover’s proposed £1bn investment in its Castle Bromwich factor must be put.
The first is that it is the first genuinely good piece of news from the UK car industry for quite some time.
Honda’s announcement in May that it will close its factory in Swindon by 2021, with the loss of 3,500 jobs, was followed last month by news that Ford is to close its engine plant at Bridgend next year with the loss of 1,700 jobs.
Other pieces of bleak news include an announcement from JLR itself that it will be cutting 4,500 jobs, while Nissan in February reversed a decision to build its new X-Trail in Sunderland, deciding instead to build it in Japan.
And PSA, Vauxhall’s new French owner, has made clear that a decision to build the new Astra at Ellesmere Port in Cheshire is conditional on a Brexit deal with which it is satisfied.
So this announcement from JLR, headed by the Anglophile Ralf Speth, is unalloyed good news.
The second piece of context concerns the push from conventional petrol and diesel engines to electric vehicles.
The UK is under-performing in this field and has been largely unsuccessful in attracting carmakers to build electric vehicles in this country.
There have been one or two exceptions to this, notably Nissan building the Leaf in Sunderland and Toyota building the Auris hybrid at Burnaston in Derbyshire, but Honda’s decision to shut down operations at Swindon reflects its decision to build its electric and hybrid models in Japan.
And the first electric vehicle produced by JLR itself, the I-Pace, is built not in the UK but in Austria. The electric vehicles Sir James Dyson is planning as a rival to Tesla, meanwhile, will be built not in Britain but in Singapore.
Dr Speth himself identified the main reason for this failing: the UK’s lack of meaningful electric car battery production facilities.
That is why today’s announcement has been accompanied by a call from him for a “giga-scale” battery production plant.
Electric car batteries are difficult to transport and, accordingly, it helps if production is close to where the cars themselves are being produced.
As Dr Speth put it: “Affordability will only be achieved if we make batteries here in the UK, close to vehicle production, to avoid the cost and safety risk of importing batteries.”
He pointed out that, while the batteries that will power the new electric XJ will be assembled just up the road from Castle Bromwich at Ham Halls, they will be using fuel cells sourced from overseas.
He will doubtless have been watching closely the example of BMW, his former employer, which has committed to building the new electric Mini at its plant in Oxford but using batteries imported from Germany – one of several European countries now scrambling to put in place car battery production facilities and close the gap on the likes of China, Japan and South Korea.
All of the European carmakers have been caught out by the speed with which consumers are switching away from diesel and are now rushing to switch into electric vehicle production.
Yet for this to happen at scale in the UK, domestic battery production will be essential, as has been highlighted by the Faraday Institution, the independent institute specialising in battery research set up by Business Secretary Greg Clark.
It published a report in March this year in which it starkly warned that, without any gigafactories of the kind Dr Speth wants to see, 114,000 jobs could be lost in the UK car-making industry by 2040.
The institution also pointed out that, without such a facility, Britain’s balance of payments deficit would balloon because 40% of the value of an electric vehicle is the battery.
Importing all batteries used in UK-built electric vehicles could, it warned, raise the UK’s annual imports by up to £12bn a year.
The flip side to all of this is that battery production represents a major opportunity for British industry.
Setting up a domestic battery supplier would be the biggest single shot in the arm that the government could give electric vehicle production in this country.
The institution says that, given the excellence of Britain’s universities, the UK could become a world leader in the production of both batteries and electric vehicles – potentially creating a further 246,000 car-making jobs by 2040. That is the prize.
Carmakers, meanwhile, are having to collaborate in developing electric vehicle technology due to the sheer cost involved.
JLR itself has joined forces with BMW, Volkswagen and Ford are working together, while Fiat Chrysler and Renault recently explored a full-blown merger as a way of bringing down costs.
But it is hard to see how a gigascale battery factory could be established without some support from government and with ministers and the carmakers themselves working closely together.
Asked about the UK’s challenge in catching up with the likes of China, Dr Speth told Sky News: “I guess there’s quite a nice challenge to catch up.
“The UK really does have all the ingredients. We have the suppliers, we can work with the universities, bring the best universities together.
“We have the creative teams and the talent in the UK to make a difference for the next generation of batteries – not just investing billions now for the old generation. In that area, we are very well experienced and we know how to do it.”
To that end, a lot will depend on the new prime minister, with Mr Clark – who has been calling for the construction of a battery gigafactory for some time – seen as unlikely to be reappointed by Boris Johnson.
That is one of a host of questions raised by today’s announcement.
Another is why, in view of the ongoing uncertainty surrounding Brexit, JLR – which has previously been outspoken in urging the government not to leave the EU without Britain securing a deal – has made the decision to invest now.
Some in the industry think that, had JLR not made this move, Castle Bromwich would ultimately have had to close – speculation on which Dr Speth declined to comment during his Sky News interview.
There was no mention of Brexit in today’s statement but the implication is that – with the UK car industry having warned only last month that a no-deal Brexit could cost it £70m daily – that JLR is assuming there will be some kind of deal to ensure the continuation of frictionless trade and the avoidance of tariffs on imported components.
That speculation will be fed by Dr Speth’s confirmation today that, unlike Nissan – which is thought to have received guarantees of UK state aid ahead of its 2016 commitment to remain in the UK post-Brexit – JLR is receiving no government money in converting Castle Bromwich to electric production.