Over recent decades, Britain’s economy has become steadily more service-based. But as the opening ceremony of Birmingham’s Commonwealth Games powerfully illustrated, industry still occupies pride of place in the imagination of regions such as the West Midlands. At the Alexander stadium, Jaguars, Minis and Rovers of various vintages were showcased to the world – the past and present of a car manufacturing sector that provides well-paid, skilled jobs, and defines a local sense of identity.
The future, though, has never looked more insecure. In the short term, a combination of the pandemic and Russia’s war in Ukraine has created a supply chain crisis that has led to an output slump and drop in sales. In July, car sales in the UK fell by 9%. Falling living standards, prolonged recession and high inflation will add to the industry’s problems by hitting demand. This perfect storm is challenging enough. But the longer-term question facing the UK car industry is existential: as the world leaves the internal combustion engine behind and moves to battery electric vehicles, is Britain going to remain a mass car producer or not?
Even as domestic demand for electric cars rises, the UK is in danger of falling irrevocably behind in the race to build battery manufacturing capacity – probably the crucial factor in determining the location of future car-producing hubs. In the rest of Europe, 35 battery gigafactories will be up and running by 2035 – the date from which the sale of new diesel and petrol cars will be banned. The European Union has provided €6bn worth of financial incentives to turbocharge this process. National governments are also lavishly betting on the future. Germany, for example, where Elon Musk’s Tesla has built a gigafactory close to Berlin, has used state subsidies to establish the former East Germany as an emerging e-mobility heartland. Emmanuel Macron has put electric vehicles at the heart of an £8bn post-Covid plan to modernise the French car industry. Renault, part state-owned, is in talks with Stellantis, the owner of Peugeot, and the energy giant Total over ramping up domestic battery-manufacturing capacity.
And Britain? To date, the money spent by the government on rolling the pitch through state aid is – to put it politely – small beer by comparison. A proposed gigafactory near Coventry remains unfunded and without a manufacturer on board. Jaguar Land Rover is keeping its options open and may choose to relocate its electric car production to plants in Slovakia. The expansion of the UK’s only large-scale battery factory, in Sunderland, is welcome, as is the prospect of another nearby in Blyth. But this is nowhere near enough if the UK is to realistically maintain mass production in the e-mobility era. To compete, experts estimate at least six more will be needed.
Last year, the transport secretary, Grant Shapps, boasted that moves to phase out petrol-only car sales by 2030 would give Britain a head start in this race. The emerging facts on the ground suggest otherwise. Just as with wind-turbine manufacture in the late 1990s, when Germany and Denmark in particular acted swiftly to achieve market dominance, Britain is in danger of missing out. As the shadow secretary for climate change, Ed Miliband, has suggested, direct and significant public investment in battery capacity is required to allow it to catch up, as well as in charging points and other infrastructure. Instead, Whitehall sits back, sets targets and hopes that the market will do the job for it.
That approach is palpably failing. If Birmingham’s vibrant opening ceremony is not to be viewed in retrospect as a pathos-filled last hurrah, the government needs to get real and invest in this vital pillar of the green transition.
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