Report: Looming ‘gigafactory gap’ threatens UK automotive industry’s growth

The Chinese firm is contemplating an initial investment of £1.2bn into the project.

The warning is detailed in the ‘batteries for electric vehicles’ report published by the House of Commons’s Business and Trade Committee, underscoring a critical ‘gigafactory gap’ that threatens to derail the UK’s position in the global EV transition.

The report warns that urgent action is imperative to bridge this gap, emphasising the indispensable role of attractive conditions for EV battery production within the UK.

Business and Trade Committee’s chair Liam Byrne said: “Power was at the heart of the Industrial Revolution, and it will be at the heart of the Green Industrial Revolution. But right now, the UK is on course to secure barely half of the electric battery capacity needed by the domestic car industry alone.

“Unless we fix this fast, we risk the industry simply relocating to Europe or the US or becoming reliant on imports from China and elsewhere. Now is the time to act.”

The Committee notes that despite the recent announcement of an additional £2bn for green investment in the UK automotive sector, competing with Brussels or Beijing in terms of subsidies may be challenging.

Therefore, the Committee is urging for a 10-year strategy to enhance subsidies, ensure access to low-cost power, allocate key sites for gigafactories, address the skills gap, facilitate tariff-free trade, mitigate risks in accessing critical minerals and provide long-term R&D support for the industry.

The Committee is further arguing that competitors have surged ahead in battery investment, leaving the UK trailing; therefore, the UK Government must actively create a more attractive investment environment for battery producers before it becomes too late.

One of the key recommendations put forth by the report is for the Government to capitalise on the UK’s abundance of low-carbon energy sources.

The report suggests that by focusing on ‘midstream’ refining processes for crucial materials like lithium, the UK could establish itself as a leader in sustainable and ethical battery production, setting it apart from other dominant players like China and the EU.

Ministers are notably expected to publish a UK battery strategy in the coming days. This will cover batteries of all sizes and is likely to encompass vapes and consumer electronics, plus grid-scale batteries, as well as EV batteries.

International competition and dependence

China currently commands 78% of the world’s cathode production, leaving 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 stakes are high for the UK, a nation ranked as the sixth largest car manufacturer in Europe.

With approximately 160,000 employed directly in automotive manufacturing and an estimated 350,000 jobs supported across the country, the consequences of the gigafactory gap loom large.

Moreover, the passing of the Inflation Reduction Act (IRA) in the US has heightened global competition in the EV supply chain, which has led to increased investment in US gigafactories, diverting attention away from Europe.

The report concludes that the UK Government urgently needs to respond to the shifting global green market with a competitive, long-term support package.

The upcoming Autumn Statement from the Chancellor is expected to provide a response to the IRA and the EU Green Deal.