March 16, 2017 / 11:36 AM / 5 months ago

UPDATE 1-Toyota to invest 240 mln pounds to upgrade UK car plant for future output

(Adds details, background)

By Costas Pitas

LONDON, March 16 (Reuters) - Japanese carmaker Toyota said it plans to invest 240 million pounds ($294 million) to upgrade its car plant in central England for future output, but retaining tariff-free access to EU markets after Brexit remained crucial.

The company said it would also move to use more locally sourced components, an area carmakers in Britain are focusing on as a way to overcome currency fluctuations and potentially meet new local content rules which could come into force after Britain leaves the European Union.

Toyota builds the Auris hatchback and the Avensis family car at the plant in Burnaston in Derbyshire. It said it would begin upgrading equipment and technology at the plant this year to allow it to build models on its new car-building platform, which can be used for different models and is being rolled out globally.

"Our investment demonstrates that, as a company, we are doing all we can to raise the competitiveness of our Burnaston plant in Derbyshire," Chief Executive of Toyota Motor Europe Johan van Zyl said in a statement.

The British government would contribute an additional 21 million pounds to the investment, the carmaker said.

Toyota said last week that it could delay a decision on whether to build its next-generation Auris model in Britain to see the outcome of Brexit negotiations.

The carmaker, which also operates an engine plant in North Wales, has invested over 2.5 billion pounds in Britain and employs over 3,000 people at its sites.

Only 41 percent of the parts in British-built cars are made within the country on average, less than the typical 50 to 55 percent local content requirement which Britain would have to agree to in some bilateral trade deals.

But van Zyl warned that it was important for the government to secure unfettered access to Europe for British-built car exports as part of a Brexit deal.

"Continued tariff-and-barrier free market access between the UK and Europe that is predictable and uncomplicated will be vital for future success," he said. ($1 = 0.8164 pounds) (Reporting by Costas Pitas, Editing by Paul Sandle and Susan Fenton)

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