Is the UK losing out in the global EV race?

Stellantis invested to ‘reshore’ some of its electric vehicle (EV) production to England this week but says more Government support is needed to go all-in on EV manufacturing in Britain. So, what are the policy gaps that still have automakers looking overseas?

Is the UK losing out in the global EV race?

Image: JLR.

Stellantis announced on Thursday (22 February) that it will produce a “limited” run of five electric van models at its Luton plant from early 2025.

Vauxhall’s parent company will invest £10m to upgrade the plant’s diesel van production line to make this happen but stated in no uncertain terms that any future investment decisions in British EV manufacturing are contingent on the UK Government taking a more strategic approach.

The firm’s UK lead Maria Grazia stated that policymakers have more to do in stimulating demand for EVs and in helping manufacturers weather the transition.

A recent House of Lords Report outlined the biggest barriers on the demand side in depth, covering issues from high upfront costs and scaled-back grant funding schemes to the growing prevalence of misinformation and disinformation in the media.

Here, edie rounds up the policy moves the UK Government has made to support automotive manufacturers – and the remaining policy gaps in the UK which continue to make offshoring EV production to other markets an attractive option.


Zero-Emission Vehicle Mandate

When Prime Minister Rishi Sunak delayed the UK’s ban on new petrol and diesel car and van sales from 2030 to 2035 last September, automakers immediately pressed for clarity on whether they should alter their preparations.

Thankfully, Ministers updated the Zero-Emission Vehicle (ZEV) Mandate targets within two weeks and changes officially entered force at the start of 2024.

The Mandate compels manufacturers to ensure that an ever-increasing proportion of their output is accounted for by ZEVs. Those going further and faster than necessary gain credits which they can trade with peers who are not meeting their targets. A key year is 2030, by which point 80% of car manufacturing and 70% of van manufacturing must be accounted for by ZEVs.

ZEV mandates also exist in markets including the US, EU and China, but the UK touts its targets as the most ambitious.

A £2bn boost 

November 2023 saw the UK Government announcing a £4.5bn package of grants and loans for manufacturing sectors deemed to be strategically important to long-term economic growth and levelling up.

Some £2bn of this was earmarked for the automotive sector in a bid to help businesses adopt the technologies and processes needed to comply with the ZEV Mandate.

Application processes for businesses seeking a share of this funding have not yet been confirmed, and details on exactly which kinds of businesses can benefit remain to be seen.

In tandem with unveiling the funding, the Government confirmed an expansion of the ‘Made Smarter’ programme to cover the entire UK from 2026. The scheme supports SMEs in adopting digital technologies that can boost efficiencies and cut costs.

UK Critical Minerals Strategy and UK Battery Strategy

Bloomberg NEF this month ranked the UK among the 15 most prepared countries to scale a “secure, reliable and sustainable” supply chain for lithium-ion batteries – the most commonly used kind of batteries for EVs.

The UK maintained its position in the annual ranking partly due to the launch of its revamped Battery Strategy in December 2023, which built on an inaugural Critical Minerals Strategy published in summer 2022.

The Battery Strategy set out a three-pronged set of priorities for the Government – ‘Design-Build-Sustain’ – acknowledging challenges at all parts of the value chain relating to skills, scale, resilience and ESG. But it did not include any new funding or set in motion the creation of any new policies.

Similarly, the Critical Minerals Strategy sets out a vision to expand the UK’s domestic capabilities for sourcing, refining and recycling battery materials but it remains a policy paper rather than a package with teeth.


No comprehensive response to an ever-more competitive global subsidy race

It was noted in a CBI press call this week that the Conservative Party has, to date, delivered a “piecemeal” approach to a green industrial strategy. Instead of one overarching formal document – the last of which was issued in 2017, before the UK set its net-zero target – there have been pots of funding here and there, like the £2bn.

Ministers have come under increasing pressure to update the existing outdated strategy as markets such as the EU and US have firmed up more robust policy frameworks, backed with billions in grants and subsidies to sectors including EV manufacturing.

Chancellor Jeremy Hunt and other Cabinet members have stated that the UK will not run into this subsidy race head-on, partly as it cannot hope to outspend the likes of the US and partly due to its wish to focus on a smaller cohort of priority low-carbon sectors. There is also the issue of this kind of approach clashing with conservative ideology.

In the CBI press call, speakers noted that this is fine – provided that the UK Government actually picks its priority sectors and sets out long-term, joined up, sector specific interventions, which it has not in recent years.

In the EV space, Ford has already publicly stated that it chose the US as its focus base for expanding production purely because of multi-billion-dollar support available through the Inflation Reduction Act.

A lack of long-term energy price crisis interventions

Automakers warned in summer 2022 that the energy price crisis was hitting manufacturing sites in Europe more acutely than those overseas. Trade body the SMMT spoke of energy bills in the sector being 50% higher in 2022 than 2021 and noted that bills were already higher than in mainland Europe before the price crisis began. Make UK subsequently warned that energy bill hikes were putting 60% of its members at risk of bankruptcy.

The UK Government did run a six-month scheme providing money towards business’s energy bills, but this expired in March 2023 as it required an unsustainable amount of finance from public coffers.

This and most other similar supports have now been phased out, with support targeted at new businesses and those at most risk only. Instead, manufacturers are having to bid for funding pots available on a competitive basis, such as the Industrial Energy Transformation Fund, which supports manufacturers to boost efficiencies and move away from pricey fossil fuels.

Gigafactory strategy gaps

China currently commands 78% of the world’s cathode production, leaving EV battery manufacturers vulnerable should China decide to restrict exports of essential battery materials and components. This dependence on external sources poses a significant risk to the future success of the UK’s automotive sector.

The UK Government has stated a vision for the nation to host 100GW of battery manufacturing capacity by 2030 but MPs and industry experts have repeatedly warned that there is little in the way of formal policy to turn this ambition into reality.

MPs warned just this week that would-be Gigafactory sites foresee challenges with energy access, planning processes and exporting products post-Brexit.

They have also raised a lack of funding and top-line strategising for skills.

It bears noting that what would have been the UK’s first Gigafactory for EV batteries, in Blyth, will now be used to make larger utility-scale batteries if it goes ahead at all, after original project pioneers BritishVolt collapsed into administration.

A looming skills crunch

The UK Government has not comprehensively updated its skills strategy since legislating for net-zero in 2019 or implementing a ban on new petrol and diesel car and van sales.

The Institute of Motor Industry has warned that the UK could face an acute EV skills gap as soon as 2027. It estimates that there will be a shortfall of more than 35,000 technicians by 2030, and this is without mentioning workers at other parts of the value chain.

The Association for Renewable Energy and Clean Technology foresees similar “severe under-resourcing” in fields including chargepoint installations and maintenance, which could in turn dent customer confidence in switching to an EV.

An air of uncertainty

A general election must be called by January 2025 at the latest and opinion is divided on whether the Government will make the call this spring or this autumn. In any case, green economy leaders are not sure whether the Government will have the capacity – or feel the pressure – to set out some of the joined-up strategies already discussed above.

This is particularly true given the politicisation of EVs and the UK’s net-zero transition more broadly. The incumbent Conservative Government has positioned opposition parties’ push for a more rapid transition away from fossil fuels as detrimental to energy security, for example, and sought to force their successors to hold annual North Sea licencing rounds.

Although Sunak did move swiftly to clarify the ZEV mandate changes after announcing policy rollbacks last September, the feeling is that there is no guarantee that he will not announce further changes in these last few pre-election months. Indeed, he is reportedly mulling further policy weakening on electric heating.

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