LONDON -- Nissan has canceled plans to build its new X-Trail SUV in its factory in Sunderland, England. The automaker said the uncertainty surrounding Britain's future relationship with the European Union after Brexit was making it harder to plan for the future.
Nissan said it will produce the X-Trail only in Japan.
"While we have taken this decision for business reasons, the continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future," Nissan Europe Chairman Gianluca de Ficchy said in a statement on Sunday.
Nissan said it is increasing spending on new powertrains and technology for future European vehicles so it decided to optimize its investments in Europe by consolidating X-Trail production in Kyushu, Japan, and making the plant the global production hub for the SUV.
Nissan has a task force that is considering all of the possible Brexit scenarios and the potential impact on the business, de Ficchy said in a letter to workers.
Britain's business minister, Greg Clark, described the announcement as a "blow to the sector and the region."
Nissan first said four months after Britain voted in June 2016 to leave the EU that it would manufacture a new model of the SUV at its plant in Sunderland. The move was seen as a major vote of confidence in the country's manufacturing future.
The factory builds the Qashqai and Juke SUVs, along with the Nissan Leaf and Infiniti's Q30 and QX30 models, according to the Automotive News Europe Guide to European Assembly Plants.
The Rogue, the X-Trail's North American sibling, is built in Tennessee.
Nissan said planned investment at the Sunderland factory for the next-generation Juke and Qashqai, also announced in 2016, was unaffected.
Last year Nissan cut hundreds of jobs at the plant in response to declining demand for diesel models. Production at the site fell 11 percent in 2018.
The Sunderland plant is Britain's single-biggest car factory, building roughly 30 percent of the country's 1.52 million cars, with most exported to EU markets.
The failure of Britain's government so far to negotiate a smooth exit plan from the EU has made automakers less willing to use Britain as a European manufacturing center. Investment in Britain's car industry halved last year, data showed on Thursday, and car production by Nissan in Britain fell by more than 10 percent.
The UK's Society of Motor Manufacturers and Traders said leaving the EU on March 29 without a transition deal to preserve the smooth flow of parts and finished vehicles across EU borders would cause "permanent devastation" to the British car industry.
The timing of Nissan's announcement comes just two days after an EU-Japan free trade agreement kicked in, which includes the European Union's commitment to removing tariffs of 10 percent on imported Japanese cars.
Many Japanese companies had long seen Britain as the gateway into Europe, after being encouraged to open factories in the country by former prime minister Margaret Thatcher but Brexit has thrown that into doubt, prompting consternation in Tokyo.
European sales of the X-Trail fell 31 percent to 47,923 last year, according to JATO Dynamics market researchers.