Nissan is in advanced discussions with the UK government over financial support for its Sunderland plant in exchange for a long-term commitment to produce new models and protect jobs.
The funding could come in the form of grants, tax breaks, or subsidies, sources familiar with the matter told Reuters on Thursday, while declining to disclose amounts.
The report comes just a few weeks after Nissan signed a non-binding memorandum of understanding with Chery to study building vehicles under the Omoda and Jaecoo brands at Sunderland.
According to the Financial Times‘ sources, any new government funding would be solely for Nissan and would not be shared with Chery.
Representatives from both the British government and Nissan met last weekend in London on the sidelines of Japanese Prime Minister Sanae Takaichi’s visit to the UK.
A new commitment from Nissan is expected this summer and will be timed to coincide with Britain’s confirmation of its plans to ease rules that force automakers to produce more EVs.
Any deal is likely to hinge on a relaxation of the ZEV mandate, which currently requires 80% of all new cars sold in Britain to be fully electric by 2030.
Speaking with Reuters, Nissan declined to comment on the discussions.
“Nissan has a strong and collaborative relationship with the UK government and looks forward to continuing to work together,” the company said in a statement.
A UK government spokesperson called Nissan “an important and long-standing partner,” adding that Britain is committed to its ZEV mandate but open to reviewing it to ensure “a pragmatic and balanced approach that supports British industry and continues to drive investment.”
Sunderland’s Volume Problem
The Sunderland plant has approximately 600,000 vehicles per year of installed capacity.
Actual production reached just 282,000 vehicles in 2024 and only 273,000 units in 2025, however. Utilization sits at roughly 50%.
The factory employs around 6,000 workers and currently produces the Qashqai, Juke, the third-generation all-electric Leaf, and the all-electric Micra.
Nissan confirmed in April that its first fully electric Juke will also be built there on the CMF-EV platform, with a full launch planned for spring 2027.
The plant produced more than 35% of cars made in Britain last year, according to the Society of Motor Manufacturers and Traders (SMMT), making it the backbone of a shrinking domestic auto industry.
However, Sunderland sits outside Nissan‘s three core markets — the US, Japan, and China.
Nissan executives have previously noted that the UK automotive supply chain has shrunk to such a size that the competitiveness of the plant is hard to maintain.
Still, Sunderland avoided the closure list under CEO Ivan Espinosa’s Re:Nissan recovery plan, which targets seven plants for closure or divestiture by 2027 as part of a consolidation from 17 facilities to 10.
The plan also called for roughly 20,000 job cuts globally — about 15% of its workforce.
In May, Nissan consolidated Sunderland’s two production lines into one, freeing the second line for potential third-party manufacturing. No production jobs were lost.
Espinosa has been direct about the plant’s core challenge.
“The plant in Sunderland is a very cost competitive plant,” the CEO said at FT‘s Future of the Car summit in May. “What the plant is missing is volume, that’s why we are consolidating to one line.”
By then, Espinosa declined to identify the companies in discussions over the spare capacity but confirmed talks were progressing with “parties that are interested in working in the plant.”
On collaboration with Chinese automakers, the CEO has said Nissan was “quite open to collaborate” and that “everything is on the table.”
He added that Nissan could “leverage some of our joint work outside of China, inviting them to come into our production ecosystems.”
The Chery Partnership
A few weeks after the summit, Nissan signed an agreement with Chinese automaker Chery to study building vehicles under the Omoda and Jaecoo brands at Sunderland.
Production could begin as early as fiscal year 2027 on the freed second line. Nissan would retain full ownership of the facility and employ all staff.
The arrangement would mark the second high-profile use of a Nissan facility by Chery.
The Chinese automaker reached an agreement earlier this year to acquire Nissan‘s Rosslyn plant in South Africa, with local production targeted to begin by end of 2027.
Chery is the fastest-growing Chinese carmaker in the UK.
Its Omoda and Jaecoo brands registered 48,087 new cars in 2025, capturing a 2.4% market share in less than two years since launch, according to SMMT data.
In the first five months of 2026, Jaecoo sold 27,996 vehicles in the UK — a 3.0% share — while Omoda registered another 15,078 units.
Their combined share of the market reaches over 4.6%.
The Jaecoo 7 — available as both an internal combustion engine (ICE) car or as a plug-in hybrid electric vehicle (PHEV) — ranked as the country’s third best-selling car year-to-date at 17,668 units.
Chery‘s UK dealer network has expanded to 136 sites.
Local production at Sunderland would give Chery a way to sidestep future tariff or regulatory friction.
For Nissan, the arrangement would provide the volume the plant needs to sustain operations.
ZEV Mandate Under Review
The funding talks are intertwined with a broader recalibration of UK EV policy.
The ZEV mandate requires manufacturers to sell an increasing share of zero-emission vehicles each year or face fines of £15,000 per car outside their quota.
The 2026 target is 33%, scaling to 80% by 2030. Year to date, EVs have made up just under 24% of new car sales — well short of the target.
Changes to the ZEV rules would give Nissan room to produce more hybrid vehicles at Sunderland, in line with consumer preferences, two of the Reuters sources said.
SMMT Chief Executive Mike Hawes published a detailed critique of the mandate last week, calling for “an urgent review of the ZEV Mandate.”
Hawes argued that the regulation was designed for a period of stronger demand, greater stability, and cheaper energy — conditions that no longer apply.
Starmer is set to launch a consultation on reducing the 2030 requirement from 80% to 50%, with hybrids accounting for the other half, the FT reported last week.
The decision reportedly puts the Prime Minister at odds with Energy Secretary Ed Miliband and aligns him with Business Secretary Peter Kyle, who has been advocating for changes after lobbying from the industry and Unite.
Unite general secretary Sharon Graham has said the mandate is “significantly contributing” to the loss of automotive jobs in Britain.
An announcement is expected in the coming weeks.
Britain’s review comes six months after the European Union proposed dropping its 2035 ban on fossil-fuel vehicles.
Britain and its car industry are also lobbying the EU to be included in the bloc’s “Made in EU” proposal setting local content requirements for EVs, Reuters reported.
Around 60% of the cars produced in Britain are exported to the EU.
The SMMT argues that being shut out of the local content framework poses a direct threat to the UK’s car industry.
