Electric dreams: Is the government really prepared to save car industry after Britishvolt chaos?
Britain’s electric dreams descended into nightmares with the collapse of Britishvolt earlier this year – jeopardising the country’s ambitions to revive its flagging car industry.
Aussie power group Recharge has since spared the government’s blushes with its takeover of the company – but it no longer plans to use the proposed gigafactory as a hub for hundreds of thousands of electric vehicle (EV) batteries every year.
Instead, the factory will operate as a clean energy storage producer, before shifting into batteries for luxury sports cars.
This pivot reflects the hesitancy companies have towards reviving the UK’s car industry through championing mainstream, mass-market EV batteries.
Prospective producer Jaguar Land Rover owner Tata motors has decided not to let a crisis go to waste, and is now demanding a whopping £500m in taxpayer funds to build its own factory for EVs in the UK – threatening to take its plans to Spain if the government refuses.
The Indian motor giant has sensed weakness in a government desperate to remain a leader in the green energy race, and has essentially triggered a ‘stick or twist’ situation for the government.
This raises the question of whether the government should dust itself down after Britishvolt, and try once again to spearhead EV manufacturing or stay out of a highly competitive and costly challenge in the green energy race.
Britishvolt: UK unable to challenge big players
Alongside its ambitious net zero target, the government has created a ticking clock for its EV goals – with the UK set to ban new petrol and diesel sales by the end of the decade, and hybrids by 2035.
It has reportedly set aside £850m to invest in rejuvenating the car industry – with the UK trailing both the EU and US in EV developments.
This is a hefty sum in taxpayer money, but considerably less than the kinds of figures associated with the US Inflation Reduction Act – which has committed nearly $400bn in tax breaks and subsidies to green investment – with Chancellor Jeremy Hunt warning last month the UK is not in a position to compete like-for-like with the world’s biggest economy.
As it stands, the UK is home to just one Chinese-owned EV battery plant next to the Nissan factory in Sunderland – while 35 EV battery plants are planned or under construction within the European Union.
China continues to dominate the sector – which is home to six of the top 10 battery companies, and produces 77 per cent of the world’s EV battery supply.
This suggests the UK could simply be too small of a player to challenge for EV production and development, and should instead pivot to securing alliances with countries holding shared interests, like it has in the critical minerals race – such as depending less on China for goods.
Adam Bell, head of policy at Stonehaven and ex-head of energy at BEIS, argued that the UK should prioritise creating an environment that would encourage people to buy more EVs.
He told City PM: “While we can attempt to subsidise our way back towards increasing production, we are far better off seeking to reduce trade barriers to enable greater participation in the global car value chain and sending strong demand signals for EVs by investing in better charging infrastructure.”
Andy Mayer, energy analyst at free market think tank, the Institute for Economic Affairs, believed “this is a race we can’t win,” and that the government should cut its losses to avoid more Britishvolts in the future.
He explained: “We cannot outspend the EU, we cannot out manufacture China, and we have decided to have more expensive land, energy, and regulations than the USA. The UK’s better option would be to create a generally attractive investment climate for all types of business and see which succeed. This means lower stable taxes, proportionate regulation, and where there is support, for early-stage innovation only, not commercial subsidies.”
Throwing money will not solve the problem
While the commercial argument for manufacturing EVs is difficult to make – particularly with a tough investment climate dampened by taxes, inflation and Brexit barriers into Europe – there is a strategic argument for developing a new car industry.
In the same way the government has an energy strategy to boost domestic generation and reduce its reliance on overseas vendors for supplies, investment in EV battery production could make the UK more independent during the net zero transition, while also boosting development in the North East as part of its levelling up agenda.
Alan Hollis, chief executive of AMTE Power, a UK-based battery cell specialist, argued the government should be engaged in the battery race, but it needed a coherent plan including research, development and supply chain before committing to more funding.
He said: “Against the backdrop of an international battery arms race, the UK needs an industrial strategy for battery manufacturing which can drive domestic production, support the energy transition and respond to current and future technology requirements from original equipment manufacturers.”
Duo Fu, senior clean tech analyst at Rystad Energy, also provided a more optimistic forecast for the UK’s car ambitions.
However, they believed if the country was serious about EVs, it couldn’t be half-measures.
…the UK needs an industrial strategy for battery manufacturing which can drive domestic production, support the energy transition and respond to current and future technology requirements…
Alan Hollis, chief executive of AMTE Power
Instead, the UK had to boost infrastructure, research and development, and make cars cheaper to buy and operate – vast financial commitments.
“The country needs to invest in building a strong and sustainable battery supply chain. This includes the development of raw material mining and processing facilities, battery cell production, and recycling facilities. To remain competitive in the global EV market, the UK needs to invest in research and development of new technologies. This includes developing new battery chemistries, improving charging infrastructure, and advancing autonomous driving systems,” Fuo said.
Richard Peberdy, UK head of automotive for KPMG, believed that to sustain a strong EV industry the UK had to show it could develop EVs at scale – once this had been achieved, more investors would be lured to the market.
He said: “Whilst the UK is a global leader in high value skills and research, in a globally competitive environment the government and the local industry need to do more to show that it can be a viable manufacturing base for battery and EV manufacturing at scale.”
This reflects the challenge for the government – there is a strategic case for domestic EVs, but it relies on nothing short of transformational funding and considerably more imaginative thinking than it has so far shown.
If it doesn’t have the commitment for such ambitions, it would make more sense to close the curtain on its EV strategy with the Britishvolt debacle than to chase dreams it can’t achieve.