The British automotive industry is increasingly threatened

The performance from Britain’s auto industry over the years has changed as much as the vehicles it has produced. In the 1950s Britain produced more cars than anywhere but America; In the 1970s, the industry was on the verge of collapse. Six years ago it purred like one Rolls-Royces: 1.7 million cars rolled off the assembly line in 2016. Since covidBrexit and the rapid transition to battery power made it look more like a Morris Marina. Only around 770,000 cars came out of British factories in 2022 (see chart). The country has moved up from 13th in the 2016 automotive industry rankings to 18th.

Recent setbacks have added to pessimistic sentiment. On January 16, BritishVolt, a battery startup once heralded by the government as a symbol of electric vehicles, launched (maybe) age, incorporated administration. bmw, the German owner of the Mini brand, confirmed in October that electric versions of the car will be manufactured in China and that its Oxford plant will henceforth only produce petrol-powered cars. Shortly thereafter, Arrival, a startup that makes electric delivery trucks, said it would move most of its operations to North Carolina.

The automotive industry is an industry that directly provides 182,000 jobs and had a turnover of £67 billion ($83 billion) in 2021. But the chances of further wealth recovery are dwindling for three reasons: the globalization of the auto industryBritain’s withdrawal from the EU and most notably its poor performance on electrification, the most sweeping change in the industry since the advent of mass production.

The globalization of industry since the 1980s has been good for Britain. Japan’s Toyota and Nissan set up a shop locally and other foreign firms snapped up the best British brands. All were keen to take advantage of local engineering, flexible labor laws and membership of the EU, making the country a useful export base. Around 80% of cars still go abroad, more than half to Europe.

But globalization also made Britain’s position fragile. It’s a mediocre European manufacturing outpost for giant global corporations making no-nonsense investment decisions from afar. This makes it vulnerable to any government policy that reduces its appeal. Brexit was so big. In 2021 Honda ended production in Swindon where it had been making 150,000 cars a year, a decision announced after the vote to leave the company EU. Despite a free trade deal for industry, Brexit has added tons of paperwork for cars and parts criss-crossing the English Channel and made it harder to attract foreign managers.

Brexit uncertainty has also hampered investment at a pivotal moment for the industry, says David Bailey of Birmingham University. The UK hasn’t lost entirely in the switch to battery power. Ford said in December it would spend a further £150m to make it maybe components at Halewood on Merseyside, bringing its total exposure to £380m. Stellantis, owner of Vauxhall, is spending £100m to convert its Ellesmere Port plant in Cheshire so it can produce electric vans. Most importantly, Nissan and its Chinese partner Envision are spending £1billion to build a “Gigafactory” in Sunderland that will start producing batteries for British manufacturers in 2025 EVs. But when restructuring an industry that will spend $1.2 trillion globally on electrification by 2030, these are insignificant sums.

For global companies to choose UK as manufacturing location maybes the country needs a battery industry. As the Faraday Institution, a battery research institute, puts it, “Without large-scale United Kingdom Domestic vehicle manufacturers would gradually shut down battery production. Importing batteries isn’t impossible – Mini has done this and Vauxhall plans to do the same – but this is the second-best solution. Batteries are bulky, critical components. For manufacturing efficiency and resilience, “just down the road is always better,” as one insider puts it. There’s a “big question about a big industry without gigafactories,” says Mr. Bailey.

Britain has some advantages, including cheap and clean energy from the North Sea. But more than 40 gigafactories are already operational or planned in Europe, either by startups or through joint ventures between automakers and the battery giants of China, South Korea and Japan. So far, Sunderland is the only one in the UK.

Jaguar Land Rover (JLR), a maker of fancy motors owned by Indian conglomerate Tata since 2008, is believed to be in talks with the government over sweeteners that could persuade it to build a gigafactory in the UK. But it could easily be persuaded to settle elsewhere. Toyota, which assembles vehicles in Derbyshire and makes engines in Wales, mainly makes hybrids that only require small batteries. It has six other plants across Europe that could be better served by a new gigafactory.

As for the prospects of startups creating gigafactories, the question is whether incumbent automakers will trust new firms to deliver a component that’s about two-fifths the value of one maybe. BritishVolt, whose lack of customers contributed to its demise, shows the difficulties. A startup hoping to make batteries in Coventry has no investors so far. In contrast, NorthVolt, a start-up that has already started making batteries in northern Sweden, has investments from Volvo and Volkswagen, among others.

It doesn’t help that other countries are trying to attract maybe investments. Government support is more readily available in France, Germany, Spain and Italy, perhaps because they are still home to large firms. They also have “a much clearer investment and industrial policy,” according to Matteo Fini of ihs Markit, a consulting firm. America’s Recent Anti-Inflation Act Handing Out Dollars to Attract Investment – Reason for Arrival’s Exit UK Government funds are split between central and regional bodies, making them more difficult to access than elsewhere.

The clock is also ticking against Great Britain. the EU will stop sales of internal combustion engine cars by 2035; in the UK the deadline is 2030. Under rules of origin negotiated as part of the post-Brexit Free Trade Agreement for Cars, 55% of the value of components in cars exported from the UK to Europe must come from both places by 2027 to avoid tariffs from 10 % to avoid.

There are tears of joy. Engineering excellence has attracted many Formula 1 and other motorsport teams. World-renowned skills in battery science and others maybe Technology has persuaded many foreign car manufacturers to set up research and development centers in the UK. High-end but small companies for whom Britishness is an integral part of their branding, such as Rolls, Bentley and Aston Martin, are sure to stay. But mass production faces a difficult future. If another major company decides to follow Honda and leave the company, the rise and fall pattern that has characterized British car manufacturing could spiral into a downward spiral. a-


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