The move, one of the most significant for the UK car industry in decades and potentially the largest ever, is expected to create up to 9,000 jobs in Somerset, south-west England.
The company chose the site over another in Spain for the construction of the factory that will supply batteries for a new range of electric Jaguar and Land Rover vehicles.
“With this strategic investment, the Tata Group further strengthens its commitment to the UK,” Tata Sons chairman N Chandrasekaran said on Wednesday, confirming the move.
Tata's choice of Britain is a win for the government, which had pledged to grow the economy and had set net-zero goals, including a ban on the sale of new petrol and diesel cars from 2030.
“Tata Group's multi-billion-pound investment in a new battery factory in the UK is testament to the strength of our car manufacturing industry and its skilled workers,” said Prime Minister Rishi Sunak.
“With the global transition to zero-emission vehicles well under way, this will help grow our economy by driving forward our lead in battery technology while creating as many as 4,000 jobs, and thousands more in the supply chain.
“We can be incredibly proud that Britain has been chosen as home to Tata Group's first giga-factory outside India, securing our place as one of the most attractive places to build electric vehicles.”
The plant will be capable of providing 40 gigawatt hours worth of batteries with supplies starting from 2026. And it could supply roughly half a million vehicles per year depending on the size of the batteries.
It will be the UK's second electric battery plant compared to a reported over 30 that are already operational or in the pipeline across the European Union.
Nissan established Britain's first battery gigafactory in Sunderland, northeast England, in 2013 with its Leaf car. In 2021 it also announced a further investment totalling £1 billion in a standalone battery only plant.
Andy Palmer, the former chief executive of Aston Martin and chairman of electric battery developer InoBat said the investment would secure the future of the car battery industry in the UK.
“This is terrific news. It really is important to the UK. It’s not a panacea. It’s a step in the right direction,” he told BBC’s Radio 4 on Wednesday.
“As you look towards the future of electric cars, about 40 per cent of the value of an electric car is in the battery, so where the battery is located is where the future car production will be located.”
The government is understood to have agreed to provide subsidies worth hundreds of millions of pounds to Tata to build the factory.
Mr Palmer said the investment was necessary for the country’s competitiveness.
“If one looks towards the United States and their Inflation Reduction Act, if one looks towards the EU and their project of importance, or to India, or to China or to almost any car producing nation in the world, they are offering a lot of incentives in order to ensure they preserve the integrity of their car industry,” he said.
“There was a risk that the UK wasn’t going down the same route, and the risk would have been detonation of our car industry as we move to retooling towards electric vehicles. I think the thing is to make sure the incentive offer is competitive with the rest of the world.”
Grant Shapps, the Energy Security Secretary, said commercial sensitivities meant he could not yet declare what subsidies Tata's Jaguar Land Rover battery factory would receive, but added the government was “pleased” to make the investment.
“It is a big deal, it is probably the biggest-ever UK car investment – or certainly the biggest for 40 years,” Mr Shapps told Sky News.
“It has been nine months in negotiations, I've been involved with it throughout, including going to India.
“You're right, it has taken some government investment, for which we are pleased to do because we think … it is 4,000 jobs directly and then thousands more indirectly. But it is a very big deal.
“The exact numbers on this will come out in the normal way. Because of the commercial sensitivities, they have to be released in the usual way.”
Land Rover through the years - in pictures
Mike Hawes, Chief Executive of The Society of Motor Manufacturers and Traders (SMMT), said the news is "a shot in the arm for the UK automotive industry, our economy and British manufacturing jobs, demonstrating the country is open for business and electric vehicle production".
He added: "It comes at a critical moment, with the global industry transitioning at pace to electrification, producing batteries in the UK is essential if we are to anchor wider vehicle production here for the long term.
"We must now build on this announcement by promoting the UK’s strengths overseas, ensuring we stay competitive amid fierce global pressures and do more to scale up our EV supply chain.”
Reports have indicated that the factory will be located at the Gravity business park, a 616-acre site currently under construction near the M5 motorway near Bridgwater.
The West of England's Labour mayor Dan Norris welcomed the news but said there must be a green transport plan alongside it.
“After so many false starts, this is fantastic news for the West of England,” he said.
“Local workers are delighted to see 9,000 new green jobs wrapped up in a union flag. It shows our region is leading the way as the best place to invest in net zero.
“Given the scale of the investment, we have a real opportunity to shape the green jobs revolution, not just here in the West but nationally and internationally, to ensure these jobs of the future are high-quality, well-paid and unionised.
“However, the lack of a coherent industrial strategy means this historically rail connected site will only be accessible by road. That's a mistake.”
Jonathan Reynolds, shadow business secretary, said Labour “welcomes any investment in British jobs”.
He said: “Labour has been clear the public and private sector working together is the only way we can transition industry to keep the jobs of the future on our shores for decades to come.
“Our plans for the car industry will deliver 80,000 additional jobs and billions in economic growth ensuring announcements like this aren't a one-off but the basis for a growing economy with good jobs in our industrial heartlands.”
Labour MP Darren Jones, who chairs the Business and Trade Committee, said the decision by JLR to invest in battery production in the UK was “very welcome”.
“We will want to reflect, however, on the subsidy package that was required to secure this decision and if this approach is scalable to meet the need for further battery manufacturing sites for other car companies across the UK.”