Production of the Nissan Leaf will provide a welcome job boost for the north of England.

Nissan has announced plans to build its new electric car – the Nissan Leaf – in Sunderland, creating 550 jobs and helping secure the jobs of 2,250 people across Nissan’s UK supply chain.

The Leaf will be the UK’s first mass market electric car and production is expected to commence in early 2013, with annual production capacity of about 50,000.

Last year Nissan announced that the north-east city would be home to the production of the advanced lithium-ion battery. Together with this latest announcement it means a total investment of around £420 million will be injected into Sunderland.

The plant will also be supported by a £20.7m Grant for Business Investment (GBI) from the UK government and a proposed finance package from the European Investment Bank of up to £197.3m.

Business Secretary, Lord Peter Mandelson, said: “Today’s news from Nissan, with support from government, shows that by working together we can achieve our aim of making the UK a world-leader in ultra-low carbon vehicles.

“The investment is a fantastic vote of confidence in the Sunderland plant and its excellent workforce.”

Andy Palmer, Senior Vice President responsible for Nissan’s global electric vehicle strategy commented: “The world is at the dawn of a new era in automotive transport. Nissan Leaf, which will go on sale later this year, is a five-seater hatchback that offers the same space, practicality and performance of a similar car in its class – minus the tailpipe emissions.”

There was more good news for the car manufacturing industry today as the government also pledged its support by way of £380m in loan guarantees, to a £1.5 billion investment by Ford for plans to create a new generation of environmentally friendly engines.

The announcement means that 2,800 skilled jobs in the UK at Ford’s manufacturing plants in Dagenham, Southampton and Bridgend, as well as at its research centre in Dunton, Essex, will be safeguarded.