Pictured, left to right:  Katsunore Kojima, MD Toyota Motor Manufacturing UK, Tadashi Arashima, President Toyota Motor Europe, Lord Peter Mandelson, UK Business Secretary
Announcements last week that Toyota will begin its first hybrid production in Europe at its Burnaston factory in the UK, along with Nissan’s revelation that it will build a battery plant in Sunderland and Portugal, comes as good news for local suppliers and logistics service providers in the UK and Europe. Nissan is pushing for localisation so as to mass produce electric cars, while Toyota has told Automotive Logistics that could also further localise electric components in Europe.
Toyota will build the Auris in thus-far unspecified volume starting in mid-2010. Nissan, which will start production in 2011 of 60,000 lithium-ion batteries per year at each plant, has made the UK the mother site for European battery production for the Renault-Nissan Alliance. Its assembly plant in Sunderland is now a good candidate to produce an electric model. The company is planning to launch the car in Europe in 2011.
That Toyota chose the UK for Auris hybrid production over other European locations, including those with a clearer labour cost advantage, such as Turkey (where it also builds the current Auris), is down to several reasons, one of which is the cost and efficiency savings of building the car close to consumption. Toyota, although it exports extensively from Japan, has a production and purchasing strategy to “build in the markets in which [it] sells,” said the managing director of Toyota Motor Manufacturing UK, Katsunori Kojima. He expects the principle markets to be in the diesel-engine dominated Western Europe, with the UK and France the largest.
According to David Swerdlow, a Nissan spokesperson in Sunderland, it also makes “logistical sense to manufacture the batteries in Europe to supply batteries for the EVs to be produced by the Alliance.” While Swedlow said that logistics could be surmounted if the overall advantages of siting EV production at a different location to battery production existed, he added that the removal of those logistics cost would play some part in the decision. Clearly, this could be advantage for the Sunderland assembly plant.
Another reason, according to Toyota Motor Europe’s President, Tadashi Arashima, is the efficiency of the Burnaston plant. Although he acknowledges that the UK does not necessarily offer a cost advantage over other European locations, “from a quality and productivity point of view, we are quite happy [with production] in the UK,” he said.
Nissan’s regional selection is also related to the reputation of Sunderland as one of the most efficient plants in Europe. It also identified the UK as one of the “key EV markets,” while Portugal has already promised tax breaks of at least €4,000 to consumers of electric cars.
Help from the British treasury
A third reason for these decisions is clearly the support from the British and Portuguese governments, although none have confirmed specific terms or figures. The British government has made a clear push toward developing low-carbon vehicle technology in the UK, and LSPs and that can position themselves around this production stand to gain.
Neither has Toyota disclosed the investment in the UK that the shift to hybrid will entail, although spokesperson Steve Carter said that the model would be built on existing lines and would not require further expansion in Burnaston or Deeside in Wales, where the hybrid engines will be built. Nissan will invest €250m in each of its plants.
The UK Business Secretary Lord Peter Mandelson called the Toyota announcement “good news for the plant, good news for the supply chain and our carbon footprint” although he faced criticism from MPs and media in the UK that questioned why taxpayer money should finance the world’s largest carmaker and Nissan, while in the same week Jaguar Land Rover announced 300 job cuts and the end to the Jaguar X-Type model sooner than planned. There was also criticism that the UK’s Automotive Assistance Programme, which offers £2.3 billion ($3.8 billion) in loans, had yet to pay out a pound.
Mandelson stressed that it would be up to manufacturers to decide when to borrow money from the funds, suggesting that some were not willing to dig their current debt trenches deeper. He suggested that the investment in hybrid production would be a long-term benefit to the UK industry as “the supply chain makes a tough transition to low carbon production.”
Hybrid parts from Japan … for now
The Auris hybrid will safeguard 400 jobs directly in the UK between Burnaston and Deeside, according to Carter. Nissan’s plants will create at least 200 jobs in each. Both will protect still more in its British and European supply chains, and the carmaker’s localised production and logistics strategy could guard or generate more jobs still. Toyota’s Kojima told Automotive Logistics that the current Auris uses 50% of its part from the UK, 40% from Europe and 10% from Japan, however the Japanese content in the hybrid will be higher as Toyota imports the electronic components and hybrid battery from Japan. “But we are making efforts to localise more of the parts,” he said.
Toyota builds most of its hybrid vehicles in Japan, where it also sources the nickel metal hydride batteries it uses for those vehicles. The batteries are heavy and present higher shipping costs, and TME’s Arashima did not discount the potential of shifting battery production to Europe, as Nissan is doing. “If we are successful in the future with this type of hybrid then we will look to localise that too,” he told Automotive Logistics.
By the time UK production starts, Toyota will be the carmaker with the most geographically wide-ranging hybrid production, stretching across four continents, although Nissan is pushing to be the first to mass-produce electric vehicles, and continues to set up agreements with local governments around the world. It will also produce electric batteries and cars in the US.

Last week, the FT sources also reported that Toyota would supply hybrid batteries and engines to Mazda, as it already does for the hybrid version of the Nissan Altima sold in the US.