Initially the plant will produce an electric version of the Jaguar XJ.
JLR says the move will help secure the jobs of 2,700 workers at the plant.
The news follows January’s announcement, when the firm said it would cut 4,500 jobs, with the majority coming from the UK. That followed 1,500 jobs lost in 2018.
JLR has not announced when it will launch the battery version of the XJ, but it will replace the petrol and diesel versions which have been made since 1968.
The company’s chief executive, Professor Ralph Speth, called on the government to put more effort into providing charging points for electric cars.
“The current charging infrastructure is not really sufficient to cover the country, nor the hotspots of the cities,” he said in an interview with the BBC.
“The government has to govern the process,” he added.
JLR’s announcement comes a day after a report showed that in June sales of low emission cars had fallen for the first time in more than two years.
The Society of Motor Manufacturers and Traders said efforts to sell such cars were being undermined by confusing policies and “premature” removal of subsidies.
In response, the government said its focus on zero emission models had been a success, with registrations of battery electric vehicles up over 60% this year compared with the same period in 2018.
According to another report, even if the nation switches to electric vehicles, car use will still need to be curbed.
The Centre for Research into Energy Demand Solutions (CREDS) warned that electrifying cars will not address traffic jams, urban sprawl and wasted space for parking.
Some common concerns about electric cars explained.
The investment decision by JLR appears to contradict previous warnings by the firm that investment in the UK would be threatened by Brexit, and in particular a no-deal scenario.
However, industry experts say that JLR could not wait to see the outcome of the Brexit, as it needed to update its range of vehicles.
“Given where it is in its product lifecycle it [JLR] has to make this decision. The capacity is at Castle Bromwich and there’s research and development nearby as well, so they’ve basically run out of time on this decision,” David Bailey, a professor of business economics at Birmingham Business School, told the BBC’s Today programme.
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He added that without the new investment the Castle Bromwich plant would “effectively be dead”.
The plant also produces the Jaguar XF, XE and F-Type.
Business Secretary Greg Clark said: “Today’s announcement is a vote of confidence in the UK automotive industry – protecting thousands of skilled jobs.
“It reflects our determination for the UK to be at the forefront of the development and manufacturing of the next generation of electric vehicles.”
JLR is investing to produce an electric version of the XJ model
Investment in the UK car industry fell 47% last year from 2017 and the country is attracting a tiny fraction of the global investment in electric cars.
VW alone is investing £70bn in Europe, the US and China.
A no-deal Brexit would see new tariffs imposed on components and parts moving between the EU and the UK.
Vauxhall’s parent company said that without a deal it would not make the next generation Astra at Ellesmere Port.
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