The UK is on course to botch the shift away from the combustion engine and end up a carmaking minnow.
This week, mostly UK-based electric-van startup Arrival announced its CEO and president were stepping down. Last week, the CEO of Britain’s biggest auto manufacturer, Jaguar Land Rover, resigned after making little headway on an all-electric shift announced almost two years ago. And Britishvolt, the company thought to be the country’s best hope for a homegrown EV battery maker, is struggling to stay afloat.
It’s a bleak picture in stark contrast with the US, where car and battery manufacturers are being wooed with billions of dollars as President Joe Biden challenges China’s dominance of the global EV supply chain. That effort has gotten the attention of German Chancellor Olaf Scholz and French President Emmanuel Macron, who are hatching plans to promote and protect their car companies and suppliers.
Prime Minister Rishi Sunak has less room to open up the wallet and support what’s left of the UK’s auto manufacturing base. Chancellor of the Exchequer Jeremy Hunt last week unveiled a £55 billion ($66.7 billion) set of tax hikes and spending cuts that a free market think tank called a “recipe for managed decline.” Included within that: a plan to start subjecting EVs to road taxes in the coming years.
The UK’s austerity push adds insult to injury caused by Brexit, which plunged the country into a prolonged period of uncertainty and delayed automotive investment. During the 12 months leading up to the 2016 referendum, Britain churned out nearly 1.7 million cars. In the past year, carmakers have produced less than half that.
“We’re witnessing a slow-motion car crash of the UK auto industry,” said David Bailey, a business economics professor at the University of Birmingham. “Britain used to have an industrial strategy, but now the government seems to be standing on the sidelines.”
The UK’s struggle to modernize its auto industry threatens thousands of industrial jobs as the transformation redraws the map of where cars are manufactured. BMW last month said it will move production of electric Mini hatchbacks from Oxford, England, to China. Honda closed its car factory in Swindon last year, leaving Britain with just four mass manufacturers: JLR, Nissan, BMW and Toyota.
The UK used to boast the world’s second-biggest auto manufacturing base in the 1950s. It’s since dropped to 18th place, behind the likes of Canada and Slovakia. Local demand isn’t a reason to stick around — companies are on course for their worst year of sales in the market since 1982.
Even more worrisome is the UK’s lack of a substantive battery supply chain needed to support mass manufacturing of EVs. The country has just one reasonably sized cell plant in operation, owned by China’s Envision Group, and has failed to attract investment in additional large-scale facilities.
Britishvolt had been at the center of plans for a factory in the north of England to provide batteries for millions of electric cars. But the startup backed by mining giant Glencore is now looking for funds to keep going beyond early December.
The less than three-year-old company’s struggles pose a chicken-and-egg dilemma. Carmakers in the UK are going to be reluctant to build new factories or retool existing ones unless they can source battery cells nearby. Battery manufacturers, in turn, are unwilling or unable to invest without predictable customer demand or sizable government aid.
Unlike its Swedish rival Northvolt, which has signed some $55 billion in contracts with leading automakers, Britishvolt hasn’t secured large-scale orders. While the company has signed outline agreements with Aston Martin and Lotus, neither of the two small-volume manufacturers have made firm commitments.
The UK isn’t at risk of total car industry collapse. Volkswagen-owned Bentley is spending £2.5 billion to modernize its factory in Crewe, England, and electrify its entire lineup by the end of the decade. Nissan has committed to making battery cars at its Sunderland plant, creating 1,650 jobs. Stellantis is investing £100 million to retool its 60-year-old Vauxhall factory near Liverpool to make electric vans.
Britishvolt’s site in Blyth is a great fit for a battery factory because of its ample space and access to clean energy. The company has held discussions about selling the site, according to people familiar with the matter.
The UK needs to move fast if it wants to reverse the downward spiral it’s on. Toyota, which makes engines and Corollas in the UK, has not yet started to retool its two local plants for the electric age. Large battery factories have been announced or opened this year from Italy and Spain to Sweden, near the Arctic Circle. Bloomberg reported in May that JLR had been looking to continental Europe for supplies.
“The UK is already behind other regions in the EV shift and is playing catch-up,” Bailey said. “If all production decisions go in the right direction, output could recover. But that will require a much more collaborative industrial policy approach from the government.”
--With assistance from Siddharth Philip.
©2022 Bloomberg L.P.