Car giant Nissan has confirmed in a letter to workers that the next-generation X-Trail, planned for its Sunderland plant, will instead be made in Japan.
The decision is another huge blow to the UK’s car industry which has been warning for years about the impact of Brexit uncertainty on top of other problems such as a slump in diesel sales.
Nissan chairman Gianluca de Ficchy said in the letter that much had changed since the Japanese firm announced plans to build a new Qashqai and X-Trail in the UK in October 2016.
“At that time they were both planned as ‘traditional’ models, powered by internal combustion engines. X-Trail was already going to be made in Kyushu, but there was a good business case for bringing production to Europe as well.
”Since that time, as you know, the environment for the car industry in Europe has changed dramatically. To meet the changing emissions regulations we’ve had to invest much more in new powertrains for our future models like X-Trail. At the same time, the volume forecasts for X-Trail in Europe have reduced.
“For those reasons the company has decided to optimise our investments and concentrate production in Kyushu, instead of adding another production site. For the European business, this does not change the fact that X-Trail is – and will continue to be – a crucial model for us.
”Today’s announcement will be interpreted by a lot of people as a decision related to Brexit. We have taken this decision for the business reasons I’ve explained, but clearly the uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future.“
The letter continued: “With the UK’s departure from the EU on March 29 getting closer every week, we have a taskforce in place, reporting to me, that is considering all of the possible scenarios and the potential impact on the business.
“As a responsible business with 16,000 employees in the region, I want you to know that we are preparing across all functions, and with our supply chain, for anything that might impact our current business model. When the time comes to initiate any of those plans, we will be ready, and we will communicate with full transparency to all of you.”
In 2016, the Japanese car-maker said it would build the models at the UK-based plant after receiving “assurances” from the government over Brexit.
Nissan had voiced concerns about Brexit before finally committing to build the new Qashqai and X-Trail models in its North East factory in October 2016, four months after the EU referendum.
Labour leader Jeremy Corbyn said: “The Conservatives’ botched negotiations and threat of a No Deal Brexit is causing uncertainty and damaging Britain’s economy.”
Sharon Hodgson, Labour MP for Washington and Sunderland West, said : “I now have confirmation from Nissan UK that the new X-Trail SUV model will not be built in Washington in my constituency.
“This is a great loss of future investment in Sunderland and I am sure that many people will share my huge and disappointment and concern at this news.
“Tomorrow, I will be seeking answers from Government Ministers as a matter of urgency.”
Meanwhile, Sunderland Central MP Julie Elliott said Nissan’s reported decision was due to “the downturn in the diesel market”.
In a statement posted on Twitter, the Labour MP continued: “I will be doing everything I can to protect the jobs at the Sunderland plant.
“I will be asking for the Government to intervene, and will stay in close contact with the company itself.
“But we cannot deny the inevitable role that Brexit plays here.
“The constant uncertainty, the chaotic Government.
“None of it is conductive to encouraging business investment in this country.
Back in 2016, Nissan’s decision to build its next-generation Qashqai and add production of the new X-Trail model at the Sunderland plant eased concerns about the future of the North East factory after Brexit.
It secured thousands of jobs in the Brexit-backing city, but prompted a volley of questions over whether a so-called “sweetheart deal” between the car-maker and the Government had been struck to protect the manufacturer from any post-Brexit EU tariff wall.
Ministers strongly denied any financial incentives were offered and Chancellor Philip Hammond said any costs arising from the assurances would be small enough to be covered within the Department for Business’s existing spending limits.
The Sunderland plant, which has been active since 1986, employs almost 7,000 people, producing around 2,000 cars a day.
Nissan is part-owned by French manufacturer Renault, which had led to concerns that production could be moved to France to avoid any tariffs which might be introduced on exports to the EU if the UK leaves the single market in a hard Brexit.
Other Nissan models built at the Sunderland plant include the Qashqai, Juke, Q30, Note and the zero-emission electric Leaf.
The U-turn comes as figures show car production slumped by almost a tenth last year, leaving the industry on “red alert” amid continued Brexit uncertainty.
A report by the Society of Motor Manufacturers and Traders (SMMT) said investment had effectively “stalled” amid fears over the UK’s future trading prospects with the EU.
Just over 1.5 million cars left UK factories in 2018, a 9.1% decline on the previous year, and the lowest for six years.
Production of diesel cars was down by 22% to 561,000 last year.
SMMT chief executive Mike Hawes said the fall in investment was “deeply depressing” and should send a strong signal to politicians to secure a Brexit trade deal.
The decision by Nissan comes just weeks after a triple jobs blow in the UK car industry.
Earlier this month American car manufacturer Ford confirmed nearly 400 jobs would be lost at its engine manufacturing plant in Bridgend.
The company said the “voluntary separation programme” at the Welsh factory is needed to cut costs and create a “sustainably profitable business” in Europe.
It followed a similar move by Jaguar Land Rover to reduce its 44,000 workforce by 4,500 under plans to make £2.5 billion of cost savings.
Most of the cuts will be in the UK, with a voluntary programme being launched, and are in addition to 1,500 workers who left the company last year.
Japanese firm Honda also announced six non-production days in April under contingency plans to mitigate the risk of disruption to production at its Swindon factory after the UK leaves the EU.