Britain’s electric car fate is sealed without homegrown batteries
With the Spring Budget only just in the rearview mirror, Treasury officials are already putting the finishing touches on a new set-piece event: Green Day.
On Thursday, Chancellor Jeremy Hunt will provide more details of the £20bn plan to secure the UK’s energy supply and bring down bills, the outline of which was first announced in the Budget.
The statement, dubbed Green Day in the press, is expected to include new details of nuclear and carbon capture projects raised earlier this month in the Budget.
Households and businesses anxious to know when their energy bills will fall are sure to listen with interest.
Yet UK industrial chiefs are waiting for details of another scheme: the Advanced Manufacturing Plan.
The plan, expected in the next few weeks, is the Government’s long-awaited response to the Inflation Reduction Act (IRA), a huge package of subsidies and tax breaks promised by the US to lure green manufacturing to its shores.
A $369bn bonanza of handouts was unleashed by President Joe Biden last year, luring startups and established names such as Volkswagen to North America with cut-price green energy and tax breaks for buyers of locally-made electric cars.
The EU is expected to come up with a similar package in response.
Even if it does not, countries in the eurozone currently enjoy cheaper electricity prices than Britain, which makes it a more attractive place to invest.
Stuck in the middle, British manufacturers face a bleak outlook: investment will be harder to come by and products will be dearer for lack of subsidies.
“As we stand, the UK loses, generally speaking,” says former Aston Martin boss Andy Palmer.
The Government’s response is particularly consequential for Britain’s already struggling car industry.
Honda, which was a top five carmaker in Britain, stopped manufacturing here two years ago and insiders fear the sector is dangerously close to a death spiral.
Fewer car plants means less work for suppliers, which will then close down or scale back. Fewer suppliers mean less of a reason to have a car plant in Britain, and so forth into oblivion.
More than 800,000 well-paying jobs hang in the balance, already a dwindling number.
Crucial to pulling out of this slump will be attracting battery plants, which can help to sow the seeds of an electric car-driven manufacturing revival.
Batteries are one of the most expensive components of electric vehicles and a local supply is a key deciding factor when manufacturers are assessing new plants.
Nissan has invested in its own plants in the UK to cover much of its battery needs, although it will require additional supply. BMW has signalled that Mini could be supplied with batteries in the UK, although a final decision is still awaited.
However, for Toyota, Jaguar Land Rover and the long list of sports car marques from Aston Martin to McLaren, a local supply is needed.
The collapse of homegrown battery hope Britishvolt – and its purchase by investors who will focus away from car batteries – was a serious blow to hopes of a private sector-driven solution.
Government insiders insist the Advanced Manufacturing Plan will include measures to help deliver gigafactories and secure the supply of metals and minerals needed for battery manufacturing.
A key test is whether the UK will snag Jaguar Land Rover (JLR)’s planned battery plant. Its owner, Indian conglomerate Tata, is choosing between Spain and the UK.
JLR competes with Nissan for the title of Britain's top carmaker, with the two responsible for about half of domestic car production between them. A decision to base JLR’s battery manufacturing in Spain would be seen as a huge blow to the future of local carmaking.
Tata wants £500m of help, which is likely to mean new money from Hunt.
“If you're not going to spend any money, you're not going to get a battery plant,” said Dr Palmer, who was also an executive at Nissan.
Discussions between industry, the Department for Business and Trade, and the Treasury continue. Insiders insist that a deal could be done outside of a major fiscal event, meaning the gap between now and the next budgetary event, the Autumn Statement, is no barrier.
However, officials in Westminster grumble that carmakers are dangling the prospect of jobs and demanding taxpayer cash in return.
Yet, with the US promising such lavish subsidies, the Government is over a barrel.
Dr Palmer says there are other potential sweeteners beyond cold cash that Hunt and his colleagues could offer.
Better charging infrastructure would help as cheap, fast chargers will lead to faster take up of electric cars. They would also enable manufacturers to build lighter cars with smaller batteries.
A car with half the battery size of today’s models should be able to deliver a 150-mile range for less than £20,000 after a few years of development, he says, which would be fine for most drivers if they can top up without a detour or a delay.
Seeding a market for cheap electric cars would create a virtuous circle by drawing more carmakers here, since Britain is already Europe’s second-biggest market for motors of all fuel types.
Labelling cars with their carbon footprint could also help encourage domestic industry. Imports from faraway countries like China will have a much bigger carbon footprint on display, which may prompt drivers to buy local.
The Society of Motor Manufacturers and Traders, the car makers’ industry group, has said that making it easier to get planning permission to build gigafactories and other green plants would help.
Unpegging electricity prices from gas, which would cut the price of power, would also help.
Yet even if all of these changes are introduced, the Government will still most likely need to spend money if it wants to foster a green car industry.
“Battery manufacturing isn't a free market anywhere in the world,” says Dr Palmer. “It doesn't conform to the laws of Adam Smith. All battery makers are supported by their home governments.”
A Department for Business and Trade spokesman said: “We are determined to ensure the UK remains one of the best locations in the world for automotive manufacturing and have seen many examples of car manufacturers choosing the UK thanks to our competitive investment environment and through the support of Government.”