Stellantis will manufacture electric vans at its Ellesmere Port plant with a £100m investment that safeguards the Cheshire factory following a UK government financing deal.

The carmaker, formed by this year’s merger of Peugeot and Vauxhall owner PSA and Fiat Chrysler, will make electric versions of the Vauxhall and Opel Combo vans at the facility, as well as the Citroën Berlingo and the Peugeot Partner.

The plant will make “tens of thousands” of electric vans from the end of 2022, using a fraction of the current space at the site to increase efficiency, but keep its headcount of 1,000.

“There will be no job losses,” said Paul Willcox, Vauxhall’s managing director.

The plant would also initially import battery cells for the vehicles, which will be made into packs on site, although it was open to buying cells from UK plants in future, Stellantis’ manufacturing director Arnaud Deboeuf told the Financial Times.

“If the UK supplier can provide them more affordably, then of course we will,” he said, though adding the lack of supply currently meant the company did not consider UK batteries for the first models.

After months of talks described as “intense”, ministers agreed to about £30m of financial support for the Stellantis investment, people briefed on the discussions said.

It is the second major UK electric vehicle investment to be announced in a week, after Nissan’s £1bn project to make an electric model and battery plant in Sunderland, and comes as the government tries to drum up investment into battery production in the UK.

“This £100m investment demonstrates our commitment to the UK and to Ellesmere Port,” said Stellantis boss Carlos Tavares. “Producing battery electric vehicles here will support clean, safe and affordable mobility for the citizens. Since 1903 Vauxhall has manufactured vehicles in Britain and we will continue to do so.”

Business secretary Kwasi Kwarteng said the plant, the first all-electric facility in the Stellantis network, would be “a beacon of how automotive manufacturing can be done in the UK”.

He told the FT: “What last week and this week have shown is that the UK is open for business.”

While Stellantis needs more van capacity to meet increased demand from the boom in home deliveries, the company is also required to increase factory space as a condition of the €50bn merger between PSA and FCA that was finalised in January.

To assuage concerns that a merged group would dominate the highly profitable European van segment, Stellantis agreed to produce more vans on behalf of Toyota, which has a commercial vehicle partnership with PSA.

The factory that makes Toyota models in Spain is at full capacity, so the refreshed facility at Ellesmere Port means PSA models in Spain can give way to Japanese vehicles, it is understood. Stellantis has not decided whether to make electric Toyota models in the UK, Deboeuf said.

The Stellantis decision saves the plant, which suffered from dwindling sales and risked following Honda’s car factory in Swindon and Ford’s Bridgend engine plant, which have both closed.

Shadow business secretary Ed Miliband called it “a huge relief after so much speculation about the future of the Ellesmere Port plant”, but warned ministers needed to increase the £500m offered to woo battery investors in order to protect the UK’s other car plants. Labour has proposed a fund of £1.5bn.

“The government must increase and accelerate investment and stop leaving the future of the industry on a knife edge,” Miliband said.

At its peak, Ellesmere Port employed 12,000 workers. Its current workforce is about 1,000 after shifts were cut back in recent years and staff laid off.

Staff were told at a briefing on Tuesday that the manufacturing space at the site would be reduced by 64 per cent due to efficiency improvements, according to a person familiar with the details.

Ellesmere Port is one of the most export-exposed plants in the UK, sending roughly 80 per cent of its Astra models to Europe, but is dependent on imported components for more than three-quarters of its parts.