Yahoo Finance Why Britain must speed up to stay in the electric car race
When working at Nissan, Andy Palmer was tasked with finding a way to catch up with rival Toyota’s dominance of the hybrid car market.
“Nissan was getting its arse kicked by Toyota with the Prius,” says Palmer, who worked at the Japanese car maker from 1991 to 2014, before leaving to join Aston Martin.
He was asked to make a competitor to the Prius, but Palmer and his team persuaded Nissan to instead leapfrog hybrid technology and in 2010 the Leaf electric car was born: now the world’s second best-selling electric car.
Palmer has been described as the “main proponent” of producing electric vehicles (EVs) at Nissan. Now, with more than 40 years’ of industry experience, he says the UK car sector needs to take a similar approach if it is to recover from years of slowly sliding down the global production tables.
Investment in the tens of billions of pounds will be required if British car manufacturing is to meet the challenges of slashing emissions in the race to go green, and scale up the production of electric cars. It comes amid competition from large multinationals based abroad, backed by wealthy owners with deep pockets.
In the 1950s, only the US and the Soviet Union made more cars than the UK. But now the country is languishing in 14th place, according to figures gathered by the International Organisation of Motor Vehicle Manufacturers, having been overtaken by Germany in the 1960s, Japan in the 1970s and, more recently, by Turkey and the Czech Republic.
Coronavirus shutdowns and a global shortage of the cheap computer chips that control the inner workings of a car are major factors contributing to the more recent decline in Britain’s car production. Annual output has slumped to less than 1m, from about 1.7m five years ago.
And underinvestment means the road to recovery will be challenging, says Andrew Bergbaum, managing director at AlixPartners: “I think it’s clear that even to get back up towards the 1.5m numbers is a fairly optimistic view about what’s going to happen for UK production.”
Hopes of a renaissance in UK car production were pinned on a resurgent Jaguar Land Rover (JLR), which in 2016 overtook Nissan before peaking two years later with more than 600,000 sales.
But hopes were subdued as JLR cut UK jobs and diesel engines – the mainstay of its bigger Land Rover brand – became unpopular in the wake of Volkswagen’s emissions scandal in 2015, when it emerged the brand had installed devices to rig its pollution emissions data on some cars in the US. In 2018, JLR moved production of the Land Rover Discovery to Slovakia before cutting 4,500 jobs a year later.
Britain is not alone. Germany, for instance, has also seen a dip in production but, according to Bergbaum, should snap back as it invests in battery manufacturing.
He says: “There’s an industrial model that is being played out in continental Europe that has investment not just in the production lines themselves but, moreover, producing batteries, onboard chargers, electric motors, which is going to become even more important in the future.”
British capital expenditure on EVs, however, has been more sluggish. According to figures from the EU’s statistical office, Germany’s car industry outspent the UK’s by more than 5:1 on things such as new plants and equipment in 2018.
In total, about $300bn (£219bn) is promised by large car manufacturers around the world in EV investments, according to Bergbaum, illustrating the scale of the current and expected demand.
Large-scale manufacturers, with more backing, are likely to win the EV game.
“As you go lower in the supply chain, generally speaking the profitability gets less and the competition becomes higher,” Palmer says. “It’s better to be at the top of the food chain.”
“My big concern is around the gigafactories,” he adds. As the UK seeks to meet targets in decarbonising the economy, such as all new cars and vans being fully zero emissions from 2035, the country will need to build as many as seven between now and 2040, according to the Faraday Institute.
Britishvolt is building the UK’s first, in Northumberland, at a cost of £2.6bn, while the Environmental Audit Committee estimate each gigafactory to cost £2bn to £4bn. That suggests up to £28bn of industry investment could be needed just for the facilities to make batteries, let alone design new bodies, build motors or make the software necessary for them to run efficiently.
Whether Britain will have enough “depends on how quickly we can scale up the supply chain here in the UK,” says Matt Windle, managing director of sports car maker Lotus, owned by Geely – one of China’s largest automobile companies.
Roughly three quarters of lithium car batteries are made in China, to Lotus’ advantage, although tariff rules make importing batteries an expensive option, as does their weight.
“To support the vital UK automotive sector and maintain our all-important Britishness, our preference will be to source in the UK,” says Windle.
Smaller companies will probably need a similarly larger parent or sponsor to be able to make the leap to electric and scale up enough to meet demand, according to Palmer.
While the likes of Mini and Rolls-Royce can rely on the buying and borrowing power of owner BMW, independent firms such as McLaren and Aston Martin might struggle to raise the billions of pounds necessary for a battery plant, despite the wealth of their backers.
Other nations have had the same predicament, Palmer says, and can offer a blueprint of success.
“Fifteen years ago, China said we can’t beat the West in internal combustion technology, so let’s put everything on black and we’ll go for being a leader in electrification,” he says. “It has allowed them to essentially leapfrog the West.”
China surged from being the 14th largest car producer in 2000 – where Britain currently languishes – to first place today, having ramped up output from 600,000 vehicles to nearly 20m last year.
For the UK to accelerate ahead and attract investment from large companies, experts argue it will need a start-up culture similar to California’s, which has helped companies like Tesla flourish.
Its advantages, however, include world-class research at universities, the potential for plentiful cheap wind power and the skills to develop hydrogen-based zero-carbon cars.
A BEIS spokesman said: “The UK continues to be one of the best locations in the world for auto manufacturing through a major £850m Government investment programme to electrify our supply chain, create jobs and secure a competitive future for the sector.”
“If you are worried about an industrial segment in the UK, then you need to support it, and you need to support it properly,” argues Palmer.
Britain’s success, however, to move up the production ranks and become a leader in making environmentally friendly cars ultimately depends on how much manufacturers and the Government are willing to invest.
