Written evidence from Transport & Environment (BEV0012)

Business, Energy and Industrial Strategy Committee inquiry: Batteries for electric vehicle manufacturing

Transport & Environment response

Introduction

This submission has been prepared by Transport & Environment (T&E) UK in response to the Batteries for Electric Vehicle Manufacturing inquiry from the Business, Energy and Industrial Strategy Committee.

 

T&E is Europe’s foremost sustainable transport NGO, a federation of almost 60 national organisations campaigning for greener transport. T&E has been closely involved in developing previous EU car and van CO2 regulations, defining the WLTP test, and has detailed understanding of policies to reduce vehicle CO2 emissions.

 

T&E is pleased to submit evidence to this inquiry. The Government has set out good ambition to end the sale of new petrol and diesel vehicles from 2030 and committing to introduce a Zero Emission Vehicle mandate. But while this ambition is welcome, uncertainty regarding the status of the Zero Emission Vehicle mandate and a lack of a clear industrial strategy for electric vehicles puts the UK automotive industry at significant risk of falling behind.

Submission

  1. With the UK phase out date of polluting vehicles set for 2035, and similar targets being put in place in other markets, the UK automotive industry must get itself set up to scale up electric vehicle (EV) production. If the industry is not ready, or is not adequately equipped to be ready, then the UK risks falling behind and potentially losing out on crucial jobs in the sector.

 

  1. While the UK is comparatively not a major car manufacturer globally, it is still home to a number of big production facilities, including Nissan in Sunderland, BMW in Oxford, Jaguar Land Rover in the Midlands and Merseyside and Toyota in Burnston. Overall, the UK automotive sector contributed over £14bn in GDP to the UK economy and employs over 780,000 people.

 

  1. The automotive industry is struggling already due to a myriad of factors - production in 2022 fell to its lowest level since 1956 with semiconductor shortages among things to blame. Meanwhile EV production was at record levels - the struggles of the industry, contrary to some reports, is not due to the shift towards electric vehicles. In fact, the switch to EVs is what will help to preserve jobs.

 

  1. Much of the car industry accepts and is supportive of the Government’s decision to phase out new petrol and diesel sales by 2030, with many manufacturers already committing to end production of internal combustion engine vehicles by or before the end of this decade.

 

  1. The Government is planning to introduce a Zero Emission Vehicle mandate, which will set annual targets for manufacturers to sell an increasing share of EVs from 2024 until 2035 (from which 100% of sales will be electric). It has been claimed that ambitious targets for EV sales in the UK under the ZEV mandate would have a major impact on UK vehicle manufacturing jobs. This suggests two things: 1) that a large proportion of the vehicles made in the UK are sold in the UK, and 2) that UK manufacturers are not transitioning to producing ZEVs. Neither are true. In fact, 80% of vehicles made in the UK are exported: the vast majority of vehicles produced here will be unaffected by the regulation.

 

  1. What will drive job losses is if the UK is no longer an attractive market to manufacture vehicles. We know that the future of automotive transport is electric, as does the industry. If we don’t have the battery capacity to supply UK automotive manufacturers, then jobs will be lost and manufacturing will go elsewhere.

 

  1. Failure to attract and retain investment in gigafactories is a major risk to UK automotive manufacturing. Ensuring batteries are made in the UK will decrease costs and associated risks for manufacturers here. Meanwhile rules of origin under the Trade and Cooperation Agreement will mean batteries will need to be made in the UK or EU from 2027 to avoid tariffs on exports as batteries comprise a significant element of the total value of an electric car.

 

  1. The collapse of Britishvolt signals a significant problem for the UK - a lack of a robust industrial strategy for electric vehicles. Without one, the UK will be left behind.

 

  1. The US has set out its stall with significant incentives to clean industry in its Inflation Reduction Act, with investments in battery factories, mines and EVs all scaling up in the US as a result of the requirement that 40% of battery metals come from the US and half of all battery components are made in North America from 2024 for the full EV tax credit of $7,500 to apply. The EU is now also working on its own response.

 

  1. The UK needs, now more than ever, to have a clear strategy for public investment and attracting private investment in industries of the future. This doesn’t, however, mean the UK needs to take a protectionist approach which could make things worse by raising costs and putting incumbents first rather than encouraging innovation and change. It does mean removing barriers to investment and ensuring Government incentives are forthcoming and accessible for prospective gigafactory investments.

 

  1. The UK will need up to 100GWh per year of battery manufacturing capacity by 2030 to meet demand, equivalent to five large gigafactories running at full capacity - currently we have one small site open in Sunderland. With gigafactories taking at least five years to reach operational capacity, decisions on locations of sites and attracting investment need to happen now. Gigafactories are key to a thriving future automotive industry in the UK with the transition to EVs well underway. Meanwhile, gigafactory developments in Europe are advancing at speed - with around 50 sites either built or in the pipeline over the next decade.

 

  1. The site at Blyth is still a prime spot for battery manufacturing and the priority should be to find new investment and partners to ensure the opportunity for thousands of high quality jobs and economic growth in Northumberland is not lost. So far, demand and investment from the UK automotive industry hasn’t been forthcoming. Iconic British brand and manufacturer Jaguar Land Rover, for example, has committed to scaling up its production of EVs over the next decade but has yet to commit to making those EVs in the UK despite being a major West Midlands employer.

 

  1. Government action to work with industry to take advantage of the new opportunities that arise will be crucial. Auto-manufacturers will simply migrate to where battery manufacturing capacity is, which includes Europe, the US and Asia where there is no shortage of investment that currently isn’t coming to the UK.

 

  1. A robust strategy on battery manufacturing goes beyond just simple assembly, but also refers to ensuring we have sufficient supply of critical raw materials that are needed for batteries. The UK should use diplomatic networks to secure metals for green energy independence. Lithium can be secured from resource-rich Australia (where there is some spare capacity) and South America, and nickel can be secured from countries like Indonesia and Canada. Working with global mining companies will also be important, to ensure maximum volumes are freely available on the global spot markets.

 

  1. In addition to this, robust targets for recycling and reuse of battery materials will be important to keep critical metals in the UK once they’re here. The UK should look to adopt the same, if not more ambitious, targets as the EU’s battery regulation for minimum recycling rates for critical metals, such as lithium as nickel. Recycled content could make up to 12% of our critical metal needs by 2030.

 

  1. As the metals, battery and EV industry grows, Europe and the UK can still secure large parts of it: a third of global battery cell manufacturing is expected to be in Europe by 2030. Even if we continue importing significant volumes of raw materials in the coming decades, we will do so from countries like Australia, Canada, Chile and Indonesia as opposed to Saudi Arabia, Russia, Iran and Qatar. It is crucial we beef up our environmental safeguards around mining and demanding high standards of social and community engagement. In addition, smart industrial policy in the UK (e.g. domestic refining projects) and clear political direction will be important to ensure we don’t fall behind.

 

  1. The UK Government’s proposed ZEV mandate is a chance for the UK to reinforce its position as a climate leader via a world-leading piece of legislation. Despite being a majority export car market, setting ambitious targets in the early years of the ZEV mandate and ensuring that it starts in 2024 will provide both incentive and certainty to EV manufacturing in the UK that there will be a thriving domestic market. However, uncertainties around the UK’s Zero Emission Vehicle mandate start date and targets is not helping provide policy certainty to support long-term investment choices.

 

  1. While attracting additional car manufacturing to the UK is unlikely, the UK could still attract electric van manufacturing with an ambitious regulation and battery manufacturing capacity that makes this an attractive country to sell and develop new vehicles. Policy certainty was overwhelmingly highlighted in Chris Skidmore’s Net Zero Review as a priority - without it, investment in UK electric vehicle production is increasingly unlikely.

 

  1. The UK urgently needs a strategy to get the country on track to be world leader on EVs as it promised at COP26. Ambitious climate policies must be backed by industrial muscle. This means ensuring prospective gigafactories are getting access to Government incentives, and future sites and investors are being identified.