Nissan Partners with Chery to Revive Sunderland Plant Production

Nissan has entered into a memorandum of understanding with the Chinese automotive group Chery to initiate production of Chery vehicles at Nissan's Sunderland plant in the United Kingdom, the country's largest car manufacturing facility. This agreement, announced this week, is non-binding and aims to commence production at Sunderland starting next year.

Discussions between Nissan and Chery have been ongoing since April, according to the Financial Times. Last month, Nissan revealed plans to consolidate its two production lines at Sunderland into a single line and seek external partners to increase the plant's utilization rate, which currently stands at approximately 50%.

Masimiliano Messina, Nissan's head of operations in Europe, described the agreement as "an important step forward for our operations" in a statement released on Wednesday.

Nissan is among the largest employers in the UK's automotive sector, with around 6,000 workers at the Sunderland plant, where the new electric Leaf model is produced. The plant is also set to manufacture the new electric Juke, which is expected to launch in 2027.

However, the future of the Sunderland factory has been uncertain due to a comprehensive restructuring program by Nissan, which includes the closure of multiple plants and the layoff of 20,000 employees worldwide.

If the partnership with Chery proceeds, it would provide a significant boost to the British manufacturing sector. This development follows long-standing government efforts to attract Chinese car manufacturers to produce vehicles in the UK despite high energy costs.

The UK government has ambitious plans to reach an annual production of 1.3 million vehicles by 2035. Industry officials have cautioned that this target may not be achievable without the involvement of expanding Chinese automotive brands in the country. The Society of Motor Manufacturers and Traders (SMMT) anticipates production of approximately 824,000 units in the UK this year.

Chery, which owns the Omoda and Jaecoo brands alongside its main brand, is the fastest-growing Chinese automotive group in the UK, holding a 6% market share during the first four months of the year, according to the SMMT.

Other car manufacturers, including Ford, Stellantis, and Volkswagen, have held discussions over the past year with Chinese groups such as Geely and ExPENG about utilizing unused production capacity in their European factories, which has resulted from weak demand and rising production costs.

A report published by The Guardian in March highlighted the uncertainty and closure threats surrounding Nissan's Sunderland plant. According to the report, Nissan indicated it might be forced to close the Sunderland factory if the UK is not fully included in the European Union's new "Made in Europe" manufacturing rules.

The UK automotive industry representative group expressed "deep concern" over these proposals, warning they could harm the annual £70 billion trade across the English Channel.

Under the EU plans, government subsidies aimed at accelerating electric vehicle development would be limited to cars manufactured in European factories. In March, EU Industrial Strategy Commissioner Stefan Seligman announced the proposed Industry Acceleration Act (IAA), designed to protect the EU from low-cost competition from China.

Reports from the same month revealed that Nissan had privately warned the UK government that it could be forced to shut down if these proposals became law. An industry executive told the Financial Times that Nissan could face an "existential threat" if it is "denied access to EU incentives."