Vauxhall owner Stellantis has announced plans to build electric vans at its Ellesmere Port plant in Cheshire.
The £100m investment, which the UK government will contribute to, will safeguard more than 1,000 factory jobs.
The future of the plant has been in doubt after Vauxhall’s parent company scrapped plans to build its new Astra model there.
The Ellesmere Port plant will also make electric passenger car models for Vauxhall, Opel, Peugeot and Citroën.
Production of an all-electric van will start in 2022, the carmaker said.
Stellantis has held discussions with the UK government over options for its Cheshire factory and the company has secured UK government financial support understood to be in the tens of millions of pounds.
The £100m is the total amount of investment, and includes the UK government support.
Carlos Tavares, head of Stellantis, had previously warned that the company would no longer invest in pure diesel or petrol cars at the plant, and said a decision on where it would build electric vehicles would depend on the UK government’s support of the car sector.
Mr Tavares said: “Performance is always the trigger for sustainability and this £100m investment demonstrates our commitment to the UK and to Ellesmere Port.”
Business Secretary Kwasi Kwarteng said: “Ellesmere Port’s proud tradition in auto manufacturing will continue for many years to come thanks to today’s investment.
He said that the investment will also “secure thousands of jobs across the region in the supply chain”.
“In this global race to secure electric vehicle production, we are proud to support Britain’s auto sector in this crucial transition as we work to build back better,” Mr Kwarteng added.
Sales of vans have been booming during the pandemic, as a result of growing home delivery sales.
Vauxhall’s Luton plant is currently operating at full capacity so Stellantis wants to expand production at Ellesmere Port to serve the UK market.
Like other manufacturers it is also preparing for an all-electric future. The UK will ban the sale of new petrol and diesel cars from 2030, with other European countries setting similar targets.
Last week, Japanese carmaker Nissan announced an expansion of electric vehicle production at its car plant in Sunderland which will create 1,650 new jobs.
Professor David Bailey, an economist at Birmingham Business School, told the BBC’s Today programme that Vauxhall’s plans would support jobs in the short term, but there was a question over how sustainable they would make Ellesmere Port.
“There is there is no [Stellantis electric vehicle] battery plant being built in the UK… so if batteries are being brought in from France and elsewhere, that’s going to add to costs and it’s going leave Ellesmere Port as a relatively high-cost location,” he said.
“[Building one in the UK] would really anchor vehicle production at Stellantis at Ellesmere Port and Luton in the UK.
“Longer term we’re going to need a lot of batteries in the UK and we will need battery plants to keep mass car and vehicle production here.”
Stellantis is currently building two battery plants, one in France and one in Germany, and is looking to establish a third, rumoured to be in Italy.
The two “gigafactories” at Douvrin in France and Kaiserslautern in Germany will get French and German government support of €1.3bn (£1.1bn).
The Ellesmere Port plant will have a new body shop and investment in general assembly and on site battery pack assembly. Work will begin on potential wind and solar farms at the site.
Stellantis will also consult on the creation of a UK parts distribution centre which will require further investment.
The outlook for the British automotive industry is certainly a lot rosier now than it was just a few months ago.
Without investment in new products every few years, car plants die; and the ageing factory at Ellesmere Port has long been regarded as particularly vulnerable.
Earlier this year Carlos Tavares, the acerbic chief executive of Vauxhall’s parent company Stellantis, made it very clear that investment would only arrive if the government itself were prepared to support the industry.
It appears the government has done just that, with both Nissan and Stellantis, pledging to spend serious amounts of money developing electric vehicles here as a result.
But there’s a long way to go to secure the future of car manufacturing, as it prepares for an all-electric future. After years of uncertainty over the outcome of Brexit, which made carmakers reluctant to commit to new plans, the UK is still playing catch-up.
So while the news from Nissan and Vauxhall has been widely welcomed, people within the sector agree that much more is needed.
Stellantis is the world’s fifth-largest carmaker and also owns Peugeot, Fiat and Chrysler.
Ellesmere Port, acquired by Vauxhall Motors in 1957 from the Royal Auxiliary Air Force, initially developed the site as a sub-assembly and engine production line for its Dunstable and Luton factories.
It produced its first car, the Vauxhall Viva, in 1964, and produced the Viva, Chevette, and Vauxhall and Opel Astra.
Employment peaked at the site in 1975, with 12,000 people on staff.