Nissan said it is increasing spending on new powertrains and technology for future European vehicles so it chose 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.
Sunday's announcement also came as the carmaker continues to deal with the fallout from the arrest of its former boss Carlos Ghosn, which has clouded the outlook for the car-making alliance between Nissan, Renault and Mitsubishi.
May is seeking a seemingly impossible compromise between the minimal changes that Brussels says it will consider, and the radical rewrite that euroskeptics in her Conservative Party are demanding.
But Nissan's announcement is potentially more damaging for the government because of the prominence it gave to securing the carmaker's investment in October 2016, four months after British voters chose to leave the EU.
Japanese firm Honda also announced six non-production days in April under contingency plans to mitigate the risk of disruption to production at its Swindon factory after the United Kingdom leaves the EU.
Sharon Hodgson, Labour MP for Washington and Sunderland West, said: "I now have confirmation from Nissan UK that the new X-Trail SUV model will not be built in Washington in my constituency".
He added: "With the UK's departure from the European Union on March 29th getting closer every week, we have a taskforce in place, reporting to me, that it is considering all of the possible scenarios and the potential impact on business".
"It will be a critical priority of our negotiations to support United Kingdom auto manufacturers, and ensure their ability to export to and from the European Union is not adversely affected by the UK's future relationship with the European Union", the letter read, according to the FT.
Meanwhile, a government minister has said Nissan will still get its money. More than two years of political chaos over implanting that decision has put that faith to the test. Cable said. "It's actually self-harming and they should just stop".
"But I think rather than being anything to do with Brexit, this is about a very specific problem to do with this model".
So far, European leaders and officials have publicly insisted they will not reopen the negotiations.
"No one wants to see no deal", Javid told the BBC.
Nissan said it will produce the X-Trail only in Japan.
The announcement also confirmed an ongoing trend of carmakers thinking twice about future investments in Britain.
The letter, which the government has repeatedly refused to release, promised financial support of about £80m towards Nissan's investments at the site in return for the expansion of production.
The group's chief executive, Mike Hawes, described the threat of a no-deal Brexit as "catastrophic".
"What we should have been saying to Nissan was thank you", he said.