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The UK car industry is under increasing threat

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The performance with UK car industry has been as different over the years as the cars it has produced. In the 1950s, Britain produced more cars than anywhere but America; by the 1970s the industry was close to collapse. Six years ago he was purring like a Rolls-Royce: 1.7 million vehicles rolled off production lines in 2016. Since that time covid coronavirus infectionBrexit and the rapid transition to battery capacity made it look more like a morris marina. Only around 770,000 cars left UK factories in 2022 (see chart). The country rose from 13th in the car league table in 2016 to 18th today.

Recent setbacks have added to the pessimism. On January 16, BritishVolt, a battery start-up once hailed by the government as a symbol of electric cars (Ev) age, entered the adm. BMW, the German owner of the Mini brand, confirmed in October that electric versions of the car would be built in China, and that its Oxford plant would henceforth produce only cars with petrol engines. Soon after, electric van startup Arrival said it would move most of its operations to North Carolina.

Automotive manufacturing is an industry that directly supports 182,000 jobs and has a turnover of £67 billion ($83 billion) in 2021. But the chances of a new revival of the state are decreasing for three reasons: globalization of the automobile industrywithdrawal of Great Britain from Art EU and, above all, its poor record on electrification, the most profound shift in industry since the advent of mass production.

Globalization of industry since the 1980s has been good for Britain. Japanese Toyota and Nissan set up shop locally and other foreign firms bought up the best British brands. All wanted to take advantage of domestic engineering skills, flexible labor laws and membership in the EU, which made the country a useful base for exports. Still, about 80% of cars go abroad, more than half to Europe.

But globalization has also made Britain’s position fragile. It is a medium-sized European manufacturing outpost for giant global firms that make unbiased investment decisions. This makes it vulnerable to any government policies that reduce its attractiveness. Brexit was so big. In 2021, Honda will cease production in Swindon, where it produced 150,000 cars a year, the decision was announced after the vote to leave EU. Despite ​​a free trade deal for the industry, Brexit has added to the piles of paperwork for cars and parts crossing the English Channel and made it more difficult to attract foreign managers.

David Bailey of the University of Birmingham says Brexit uncertainty has also stalled investment at a crucial time for the industry. Britain has not completely lost in the transition to battery power. In December, Ford said it would spend a further £150m on production Ev components at Halewood on Merseyside, bringing the total commitment to £380m. Stellantis, the owner of Vauxhall, is spending £100m converting its factory in Ellesmere Port, Cheshire, to make electric vans. Most significantly, Nissan and Envision, its Chinese partner, are spending £1 billion to build a “gigafactory” in Sunderland, which will start producing batteries for British production in 2025. EVwith But when restructuring the industry, which will spend 1.2 trillion dollars on electrification in the world by 2030, these are negligible amounts.

Global firms are choosing Britain as their manufacturing location EvThe country needs a battery industry. According to the Faraday Institute, a battery research organization, “scaleless Great Britain battery production, domestic automakers will gradually wind down.” Importing batteries isn’t impossible – Mini has done it and Vauxhall plans to do the same – but it’s a second best solution. Batteries are bulky, important components. For production efficiency and sustainability, as one insider put it, “it’s always better to just keep going.” There is “a big question about a large 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 up or planned in Europe, either by startups or through joint ventures between carmakers and battery giants from China, South Korea and Japan. So far, Sunderland is the only one in the UK.

Jaguar Land Rover (JLR), the luxury engine maker, which has been owned by Indian conglomerate Tata since 2008, is believed to be in talks with the government about sweeteners that could persuade it to build a gigafactory in Britain. But it can easily be found elsewhere. Toyota, which assembles cars in Derbyshire and builds engines in Wales, mainly makes hybrids that only need small batteries. It has six other plants across Europe that will be better served by the new gigafactory.

As for the prospect of startups creating gigafactories, the question is whether established automakers will trust new firms to supply components that account for about two-fifths of the cost Ev. BritishVolt, whose lack of customers contributed to its downfall, is showing difficulties. One startup hoping to make batteries in Coventry has no investors yet. By contrast, NorthVolt, a start-up that has already started producing batteries in northern Sweden, has investments from Volvo and Volkswagen, among others.

It doesn’t help that other countries are trying to attract Ev investment. Government support is more expected in France, Germany, Spain and Italy, perhaps because they are still home to huge firms. They also have a “much clearer investment and industrial policy,” according to Matteo Fini of the them Markit, a consultancy. The latest American Inflation Act is handing out dollars to attract investment – the reason behind Arrival’s departure. British government funding is spread across central and regional authorities, making it more difficult than elsewhere.

The clock is also against Britain. The EU stop selling cars with internal combustion engines by 2035; in Britain, the deadline is 2030. Under rules of origin requirements agreed as part of the post-Brexit car free trade deal, 55% of the value of car components exported from Britain to Europe must come from anywhere by 2027 to avoid 10% tariffs.

There are pockets of cheerfulness. The engineering excellence has attracted many F1 and other motorsport teams. World-renowned skills in battery science and more Ev The technology has convinced many foreign car manufacturers to set up research and development centers in Britain. High-end but small firms for which Britishness is an important part of their brand, such as Rolls, Bentley and Aston Martin, are certain to remain. But mass production faces a difficult future. If another major firm decides to follow Honda’s lead and leave, the up-and-down pattern that characterizes British motoring could turn into a downward spiral.

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