Two British startups have announced plans to invest as much as £4bn in building the UK’s first large-scale battery factory, in a move that could prove a major boost to the country’s struggling car industry. AMTE Power and Britishvolt have signed a memorandum of understanding saying they will work together on plans for a plant to make lithium ion batteries, the key component in electric cars as well as energy storage products. Lars Carlstrom, the chief executive of Britishvolt, said the companies had an ambition to build facilities producing batteries with capacity of as much as 30 gigawatt hours (GWh) a year, which would be roughly equivalent to the joint Tesla-Panasonic Gigafactory in Nevada. A factory of that size would create as many as 4,000 jobs, he said. The global automotive industry is racing to secure supplies of lithium ion batteries as manufacturers seek to meet growing demand for electric cars as well as government regulations that limit carbon dioxide exhaust emissions. However, the lack of large-scale battery manufacturing facilities in the UK has raised fears over the future of the country’s automotive industry, including from the Jaguar Land Rover boss, Ralf Speth. Transport costs mean that securing a battery supply close to car assembly plants is attractive for carmakers. The government-backed Faraday Institution estimates 130 GWh of annual capacity will be required by 2040 if the UK is to retain a large automotive sector. The UK recently lost out on a major investment in battery production by Tesla. Elon Musk, the US electric carmaker’s chief executive, blamed Brexit uncertainty for his decision to choose Berlin over a British location. Other battery producers such as Sweden’s Northvolt, South Korea’s LG Chem and China’s CATL have built factories in EU countries. Carlstrom said the UK’s struggles with Brexit had provided an opportunity for the company to approach the market, with other companies unwilling to invest despite the expected demand for batteries from UK car factories. European and UK carmakers have tended to import battery cells, which are then assembled into packs to go in cars, from China and South Korea. However, carmakers such as the Vauxhall owner, Peugeot, have recognised an increasing need to secure a supply of cells closer to home. Securing investment in a UK gigafactory has been a top priority for the government’s automotive industry officials. The government-backed Advanced Propulsion Centre orchestrated the tie-up between two startups. AMTE Power, which was founded in 2013, already runs a small facility in Thurso, northern Scotland, and is looking at sites in Teesside and Dundee for a larger plant capable of 1GWh a year. AMTE, led by the chief executive, Kevin Brundish, focuses on specialist markets such as high-performance cars. Britishvolt is looking at five locations for a larger plant with an annual capacity of 10GWh of batteries aimed at mass-market cars, with the possibility of adding another 20GWh after that. Britishvolt expects to raise the first £1.2bn of funds in the next year, after receiving initial backing from Scandinavian and Middle Eastern investors. The company is confident it can raise funds despite the looming coronavirus recession, as investors look for green investment opportunities. Later stages of building could focus on different technologies, such as solid-state batteries, as development continues.