Carmakers Ford Motor Co (NYSE: F) and Nissan Motor Co Ltd (OTC: NSANF) (OTC: NSANY), conglomerates LG Electronics Inc (OTC: LGEIY) (OTC: LGEJY) and Samsung Electronics Co Ltd (OTC: SSNLF), and start-ups Britishvolt and InoBat Auto are in discussions with the U.K. government regarding locations and financial support for building gigafactories for the production of batteries for electric cars, the Financial Times reports.
What Happened: The U.K. government's plan to ban the sale of new petrol and diesel cars by 2030 and hybrids by 2035 will require the U.K.'s vehicle plants to shift to producing electric models.
British research institutions like the Battery Innovation Center and the Faraday Institute are seen as possible baits to attract battery manufacturing investment.
However, the U.K. risks being outgunned by the E.U., which is set with an enormous incentive package to entice battery makers.
The U.K. government has a £500 million fund to help finance battery plants. The E.U. has amassed a €2.9 billion war chest, with countries like France and Germany offering additional finances.
So far, there are 38 planned gigafactories across Europe. Only one stands out as U.K.'s Britishvolt project.
The recent plant closures have hassled the U.K. auto industry in recent times amid Brexit. However, it still produced 1.3 million cars annually before the pandemic hit.
The sector's push towards electrification implies securing the locally made batteries for the remaining U.K. plants. The heavy batteries should be ideally produced close to vehicle plants to minimize transport costs.
Interestingly, Ford has a plant manufacturing engine for vans at Dagenham. Ford has indicated that it was exploring making batteries in the U.K. to ship to Turkey for a planned electric version of its Transit van. Ford will confirm the battery supplier for the Transit van closer to its launch in 2023.
North-east England, which has good access to the electricity grid, has a better chance of securing plants than the Midlands due to the energy-intensive nature of battery manufacturing.
Nissan's plant building negotiations at its Sunderland manufacturing complex hinge on energy costs, as it wants to cut its energy costs to increase the site's competitiveness.
InoBat is in talks in the Midlands to locate a facility on the disused Coventry airport. It wants to focus on producing a limited number of batteries for high-performance vehicles.
Why It Matters: Britishvolt lacks proven in-house battery technology, unlike LG and Samsung.
LG and Samsung with plants in Europe are only likely to proceed if they have deals with major carmakers.
Nissan has a contract with its Chinese battery partner Envision. The largest available UK customers for battery makers include Tata Motors Ltd's (NYSE: TTM) Jaguar Land Rover (JLR), and Bayerische Motoren Werke AG's (OTC: BMWYY) Mini.
JLR revealed its plans to phase out petrol and diesel engines by 2035.
JLR CEO Thierry Bolloré disclosed plans to have the entire value chain as close as possible in the UK.
BMW's Mini plant in Oxford currently makes one electric model using Germany's imported batteries.
Ellesmere Port's Vauxhall plant owner Stellantis NV (NYSE: STLA) is in talks with the government to make an electric car at the site and is yet to engage in battery sourcing discussions.
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