Elon Musk visited the U.K. on the wave of news about the country's plans to create a new car manufacturing facility

Ministers are actively looking for a location for a major new car plant. Against this background, rumors emerged that Elon Musk was exploring the possibility of locating a Tesla plant in the UK.

Sources said that the UK government's new Office of Investment demanded that its regional agencies urgently submit potential locations for a new plant. It is expected to be a significant boost to the country's £80 billion auto industry.

The body, set up in November and headed by former Barclays chairman Lord Grimstone, is believed to have made inquiries of regional governments, including Teesside and the West Midlands, about potential sites of about 250 hectares as soon as possible.

One insider shared that the Authority requested proposals from the regions earlier this month, and "they were given just 48 hours to gather all the necessary data." The company for which the site is chosen was not disclosed, and the source added that "usually regions are given much more time and opportunity to contact a potential investor."

Such secrecy inevitably sparked rumors about Musk's involvement in the project, who visited the U.K. last weekend. The billionaire's $70 million Gulfstream G650ER plane arrived in Luton on Friday, taking a 10-hour flight from Norman Mineta Airport in San Jose, and left two days later on Sunday night.

Downing Street denied that the Telsa chief was visiting Chequers, the prime minister's country residence, during his visit to the country. But Musk had previously sought potential sites for his gigafactory in the U.K., including Somerset's Gravity Business Park last year.

There is no direct confirmation that the Tesla CEO's visit was directly related to finding a site for a new electric car production facility.

Musk has said in the past that Brexit poses too great a risk for large investments in the U.K.

But Tesla also stepped up its lobbying efforts last month, hiring a new head of public policy and business development for its U.K. unit. Natasha Mahmoudian joined the company from Centrica, where she was head of public affairs and was responsible for electric cars.

Earlier this year, Musk also held talks with the U.K. government about the possibility of bringing his satellite Internet company Starlink to deploy superfast broadband in remote parts of the country.

Along with Musk, other electric car makers - such as Rivian, which has enlisted the support of Amazon - have also shown particular interest in the U.K. this year. It is reportedly considering several European regions for its future production facilities, including Germany, Hungary, and the UK.

Any potential investment would be a major boost to the British auto industry, which employs more than 180,000 workers. The sector accounts for about one-eighth of the country's merchandise exports, with 80 percent of the 1.5 million cars produced before the pandemic sold abroad.

After the U.K., Musk flew to a new gigafactory under construction in Germany.

Work at the plant, which will produce the Tesla Model Y small SUV as well as batteries, is running behind schedule. Production of the first vehicles is not expected until the end of the year, about six months later than originally planned. Musk has expressed frustration over German "bureaucracy" that is delaying work at the plant.

According to German media reports, Tesla has already invested 4 billion euros in the Brandenburg site. It covers an area equal to 420 soccer fields. The facility will create 10,000 new jobs, and annual production will eventually reach 500,000 cars.

Musk, who shut down Tesla's press office last year, did not respond to requests for comment. During his visit to Germany, he complained that bureaucratic red tape was slowing progress: "I think there could be less bureaucracy - it would be better for everyone."

A spokesman for the Department of Foreign Trade, which oversees the Office of Investment, said: "We don't comment on current investment projects."

It was previously reported that the ministry is "working closely with partners to find locations for new investments in research, development and production of electric vehicles across the UK."

What happens when Tesla comes to town
Tesla produces only a fraction of what its competitors produce each year (500,000 cars versus Volkswagen's 6.3 million). Nevertheless, when its unpredictable CEO Elon Musk comes to town, local politicians never fail to take notice.

The 49-year-old businessman has become one of the richest men in the world and turned Tesla into the tenth most valuable listed company. His brainchild promises to help save the planet by revolutionizing the automobile industry.

Although its cars are relatively few in number, they have already changed the way people think about what it means to own an electric car. Electric cars were once seen as electric milk delivery cars, causing only embarrassment among those who saw them. But now they have become a fashionable status symbol; everyone wants to sit behind the wheel of one.

More and more countries are setting deadlines for phasing out gasoline and diesel engines, and governments are desperate not to lose the jobs that automakers have provided for decades. One of the areas of reorganization of production facilities is the modernization of gasoline- and diesel-powered car assembly lines to electric equivalents and battery manufacturing plants.

So when Musk's private jet ended up in the U.K. over the weekend - landing in Luton on Friday and leaving two days later for the Tesla gigafactory under construction near Berlin - the media uproar was only a matter of time.

The visit came less than two years after Musk abandoned Britain in favor of Germany to build his first major plant in Europe, citing uncertainty over the terms of the UK-EU separation. Now that Brexit has taken place, ministers, local politicians, and workers are hopeful that Musk will be willing to consider the country again as a potential place to set up production.

Judging by the indirect signs, they will have to work hard to do so. All of Musk's investments in new factories, from Shanghai to Texas, have come with a combination of tax breaks and special provisions... In one case, even a statue to Ilon Musk himself...

Tesla decided to build its car and lithium-ion battery plant in Nevada in 2014. This was preceded by a real fight between the states to get $1.3 billion [£917 million] in tax breaks for up to 15 years. At the same time, it was allowed to sell the cars directly to citizens rather than through dealers.

Last year, Tesla secured government support of $1,200 for each new job at its 800-hectare plant in Del Valle, Austin. That site was chosen even after another city claiming to localize Tesla production, Tulsa, remade its 20-foot statue of the Golden Driller as Musk's image in an attempt to get the businessman's attention.

Tesla entered China in 2018, building a £1.5 billion plant in Shanghai, becoming the first foreign company to be allowed to operate in the country without setting up a local joint venture. It also received financing from government lenders.

After giving up on Britain in 2019, Musk singled out "outstanding" German developments as one of the reasons he chose Berlin to build a new car and powertrain plant. Government support no doubt had something to do with it, too.

Germany is introducing new subsidies for the purchase of electric cars, and the EU is handing out state aid to manufacturers and buyers in an attempt to reduce its dependence on China. According to Business Insider, Tesla will receive more than 1 billion euros in subsidies from German regional and federal authorities.

Similarly, changes to Britain's government subsidy regime, introduced after the country's exit from the EU, could help it attract Musk. Ministers are revising the subsidy mechanisms: this raises hopes that more money can be channeled to regions suffering from underinvestment.

It is still unclear what exactly Tesla is planning in the UK. Be that as it may, the local automotive industry is currently more in need of battery plants for electric cars than of new car plants.

Battery production is currently very small. Nissan, which makes the electric Leaf in Sunderland, makes its own batteries for small cars in the UK. The company recently announced plans to localize production of more powerful units. Another manufacturer, Jaguar Land Rover, also assembles batteries itself at its Hams Hall plant. Other major car manufacturers import batteries: BMW, for example, which makes its electric Mini in Oxford.

Batteries are hard and expensive to import, so as the shift to electric cars gains momentum, automakers increasingly need affordable batteries produced literally "right next door."

"If battery manufacturing leaves the U.K., the auto industry will not survive," JLR boss Ralph Speth warned in 2019. That thesis was echoed by others in the business. Recent production levels of about 1.5 million cars a year suggest that the industry will need to produce up to 100 gigawatt hours (GWh) of batteries a year when it becomes all-electric.

Because of Brexit, the pressure is only intensifying, pushing the country to step up the creation of new battery factories. Under a deal agreed between the countries in December, to avoid trade duties on exports to Europe, where most British-made cars end up, batteries for electric cars created in the country must contain no more than 70% of materials produced outside the EU or the UK. However, by 2024, this figure will drop to 50%.

While major manufacturers such as China's CATL and Svolt, South Korea's LG Chem, Sweden's Northvolt and France's SAFT continue to set up factories in Europe, none of the well-known companies have been represented in the UK so far.

Startup Britishvolt has chosen a site in Blyth, Northumberland, for its future plant. It is scheduled to launch by 2023. It is expected to produce at least 300,000 lithium-ion batteries per year by 2027. The company has applied for industry support from a £1 billion government fund, but has yet to announce any success in this area.

Competitive battery manufacturer AMTE Power continues to look for a site for its new plant. In addition, local politicians have singled out Coventry Airport as a possible site for a major new battery plant. But as experts warn, time is running out.

James Ramsbotham, executive director of the North East England Chamber of Commerce, says: "If we want to continue the electric vehicle revolution, we have to be able to supply our own batteries, on which the whole industry depends."

Ian Henry of AutoAnalysis argues that, as electrification grows, the U.K. auto industry faces a chicken-and-egg dilemma. In his view, automakers are reluctant to open electric car factories here - it usually costs more to set one up than conventional factories - without guarantees of battery supplies for their future needs.

"Who would want to set up a battery plant without automobile factories to supply their products to?" - he added. "I don't think the UK is going to be a global exporter of batteries, so any plant set up in the country will have to focus primarily on domestic needs."

Tesla produces batteries exclusively for its own cars. This means that it is unlikely to solve the problems of creating a British battery manufacturing facility - unless politicians convince the company to take the appropriate steps and develop its own production. As a major supplier of jobs, manufacturing know-how and credibility to post-Brexit Britain, the country's battery industry will have to work hard to catch up with the rest of the market.