Amidst a gloomy series of announcements pointing to car manufacturers pulling out of the UK, there are still some signs that the future could be bright for the UK’s automotive industry.
Jaguar Land Rover (JLR) has announced it will invest hundreds of millions of pounds in electric vehicle (EV) production at its Castle Bromwich plant in the Midlands, helping to secure 2,700 jobs. The previous government had been eager to show its support, handing a £500m loan guarantee to JLR, announcing it will make charging points mandatory in new homes and cutting company car tax for EVs from 2020. In his first address to Parliament as new prime minister, Boris Johnson emphasised his vision for the UK as “the home of electric vehicles”.
But how realistic is this grand ambition? The UK still only attracts a small fraction of the new global investment in electric car manufacturing. China, Germany and the US are getting the lion’s share, with car makers’ planned investments in these countries reaching a total of over $240bn. The domestic EV market lags behind other EU countries. And, while Johnson also claims that the UK is “leading the world in battery technology”, there are no plans for large scale domestic battery manufacturing facilities, with production capacity in Europe instead expected to reach 130 GWh by 2025.
Unless this changes, the global auto industry will continue to invest elsewhere and the UK will miss its chance to claim a major stake in this industry – not to mention the benefits of cleaner air and real progress in cutting carbon from the largest emitting sector in the UK.
Government action in the following three areas could change this picture, however.
First, manufacturers need more certainty about the future market before they will invest. While Brexit will inevitably play a role, upping the domestic demand by bringing forward the ban on the sale of new petrol and diesel vehicles to 2030, and providing incentives for corporate fleets and private individuals to go electric, including by expanding charging infrastructure, would go a long way to strengthening the home market.
In the uncertainty of the post-Brexit world, it could be a great trade proposition too. Demand for electric vehicles in the EU could reach 12 million vehicles by 2030, which means the UK could capitalise on the growing European market for its car exports and help address the UK’s automotive trade deficit at the same time.
Second, manufacturing electric vehicle batteries requires critical raw materials, like cobalt. The considerable environmental and human costs of mining these materials could lead to supply disruptions, potentially creating barriers to the industry’s growth.
Instead, a system for battery reuse and recycling would mean the UK could provide a ready source to meet half of its cobalt demand in 2035 from domestically used batteries. For this to happen, the government needs to put policies in place that encourage domestic battery manufacturing and reprocessing, including revising the producer responsibility system for EV batteries to improve design, reuse and recycling.
Third, firms investing in electric vehicles could make profits in associated services, and particularly those enabled by new digital technology. For example, electric vehicles could be an infrastructure asset to support the energy system: batteries from idle cars can be deployed for balancing on local energy networks, limiting the need for network reinforcement and enabling further integration of renewables in the power system. This would enable UK firms to access new revenue streams beyond car sales, strengthening their profitability, and maximise the benefits of the transition to electric vehicles for UK citizens.
It is estimated that smart charging and vehicle to grid technology (which allows cars to provide power from the battery back into the grid), could save the energy system in Great Britain up to £270m per year by 2030 in avoided distribution network upgrades and reduced peak energy demand. To realise these opportunities, Ofgem should ensure the ongoing network charging and energy retail market reviews enable better use of EV batteries as part of a smart energy system.
China, Norway and EU countries, such as the Netherlands, have already set high ambitions for zero emissions vehicles. If Boris Johnson is serious about making the UK the “home of electric vehicles”, “powered by British-made battery technology”, his new government needs to act quickly, before it misses the chance.
Caterina Brandmayr is senior policy analyst at the Green Alliance.
