Mandelson's car scheme offers first loan to Tata

The Government has finally provided support to a car maker under its £2.3bn Automotive Assistance Programme with a £10m loan to Tata Motors.

By Graham Ruddick Published: 7:50PM BST 18 Sep 2009
Lord Mandelson, the Business Secretary, unveiled the scheme in January, pledging to support the investment programmes of British-based manufacturers with loans and loan guarantees.
However, negotiations with companies have proved controversial, with Jaguar Land Rover, which is owned by Tata, pulling out of talks and securing its own financing after the Government demanded a say in the business's strategy.

Tata has now become the first company to secure a loan under the scheme, eight months after its launch. The £10m from the Government will support £25m of the Indian company's own investment in plans to develop and manufacture Tata-branded electric cars in the UK.
The company is now "considering locations" in Britain to set up a factory, according to sources close to the talks. An announcement is expected soon. Along with the Tata Motors European Technical Centre at the University of Warwick, which already employs 180 people, the project could support hundreds of jobs.
Lord Mandelson said: "The Government is determined to help the car industry to exploit fully the opportunities offered by green manufacturing. Today we are backing Tata as Tata backs Britain.
"This loan will strengthen our electric vehicle manufacturing expertise, securing and creating high value engineering jobs in the West Midlands."
A spokeswoman for the Business Secretary said the Government was in talks with 17 other companies about projects worth £2bn.
Tata said it "appreciates" the state support. The car maker, led by Ratan Tata, has developed a four-seater electric vehicle in partnership with Norwegian group Miljø Grenland/Innovasjon. Production of the vehicle should begin in Norway later this year.
The AAP is part of the Government's support for the beleaguered car industry alongside the scrappage scheme, which offers consumers a £2,000 incentive to scrap an old car for a new model and has reinvigorated sales in the UK.
The Society of Motor Manufacturers and Traders yesterday wrote to Lord Mandelson to ask for the scheme to be extended to the original end-date of February 2010.
The scheme, which has been so successful that a 24.8pc annual decline in May new car sales was reversed into a 6pc rise in August, means that the £300m of Government funding, enough for 300,000 cars, could run out by October.
There are fears that the end of the scheme, combined with a return to the higher rate of VAT, will cause the market to slump again. Paul Everitt, SMMT chief executive, said: "Avoiding a relapse in demand is critical to the UK economy."