For years they have slumbered while America’s Tesla and electric carmakers in China have raced ahead.
But the giants of European car making have finally woken up to the challenge of electrification – and they are wasting no time.
From Scandinavia to the Rhineland and the plains of south-west France, tens of billions of euros from companies including Volkswagen, BMW, PSA, BASF and others are pouring into a string of ambitious “gigafactories”.
Their goal? To make Europe a green leader in the bulk production of lithium-ion batteries on which the industry’s future depends.
Lithium-ion battery costs
Can Britain, which also wants to be a leader in building an EV supply chain, match those ambitions?
There is a lot at stake.
The shift to electric vehicles is already reshaping the global car industry, creating both winners and losers. Like other European countries, Britain has taken a lead by ordering the complete phase out petrol and diesel car sales within 15 years.
But experts warn that if the UK cannot build a domestic supply chain for the batteries that comprise one-third of an electric car’s value, the future for car making in the UK looks bleak.
UK car sales 2020 vs 2019
“Quite clearly the UK auto industry is at severe risk of decline,” says Orral Nadjari, founder of Britishvolt, Britain’s biggest gigafactory developer, which plans to build a £1.2bn plant in Wales or south-west England.
“If the batteries go out of the UK so will the car industry.”
Nadjari says the UK has plenty to offer: long-standing expertise in the research and design of cutting edge batteries, an established car-making industry with big manufacturers like Jaguar Land Rover, Aston Martin, Toyota and Nissan, as well as a skilled labour force and domestic supplies of many raw materials, including deposits of lithium in Cornwall. The UK’s booming offshore wind industry will also enable manufacturers to source their power from renewable sources.
But so far Britain is trailing behind in Europe’s race to build gigafactories, which is being led by Scandinavia and Germany, says Nadjari.
Construction site of the new Tesla Gigafactory near Berlin
Credit: Sean Gallup/Getty Images Europe
Britishvolt is about three years behind big projects such as Northvolt, which has nearly completed a huge plant in Sweden’s Lapland due to enter production in 2021. “There is currently a race in Europe in establishing capacity,” says Jesper Wigardt, Northvolt’s vice president of public affairs.
Britain needs to step on the gas if it wants to stay in the game, according to research group the Faraday Institution.
“Without urgent action, the UK is in danger of losing out on the race to develop a large-scale domestic EV battery supply through the required investment of new factories,” it concluded in a report, which stressed that it takes five to seven years to build a gigafactory and ramp up to full capacity.
A new Tesla Model S automobile stands on a platform ahead of final testing at the Tesla Motors factory in Tilburg, Netherlands
Credit: Jasper Juinen/Bloomberg
The Institute also said Britain’s car sector needs an infusion “in the range of £12bn” to transition to EVs. Much of this will need to come from government funding, which will bring complications over state aid rules.
Right now, Britain is at a big disadvantage on this front. A special EU state aid scheme created in 2017 has earmarked a string of big EU electric battery projects in seven countries, including Germany, Sweden, Finland and France, as Important Projects of Common European Interest (IPCEI).
The scheme allows Europe to bypass its stringent state aid laws and pump prime projects like Northvolt with generous packages of state aid, which would otherwise be unlawful.
Germany’s government, for example, recently issued a €350m (£317m) loan guarantee to Northvolt.
Germany’s electric car subsidies
Britain’s future arrangement with the EU will have an enormous impact on how it can back private entities to increase its battery production.
But Nadjari fears that without urgent changes to the status quo on state aid rules, the Britishvolt gigafactory project and others like it could unravel, potentially dealing a bitter blow to the UK car industry’s future.
Germany, Sweden, Poland, and Hungary, meanwhile have all emerged as key leaders in the next generation of car manufacturing with various commitments to building gigafactories. The European Commission has also approved €3.2bn of public funding for research on the supply chain.
Sweden’s Northvolt, which counts both VW and BMW as investors, wants to take a quarter of the market by 2030. “But the other 75pc needs to come from someone,” says Northvolt’s Wigardt.
Only 3pc of the world’s battery manufacturing capacity is currently based in Europe – a figure that is about to rise sharply. By 2030, the EU hopes there will be 16 gigafactories operating across the bloc with a total output of 446 gigawatt hours (GWh) – enough to power around nine million electric vehicles a year, or about half of the 18.5m cars produced on the continent.
Electric battery/vehicle production key numbers
“The lithium-ion battery is to the 21st century what the oil barrel was to the 20th,” says Simon Moore, of electric vehicle data firm Benchmark Minerals.
What could play into the hands of the UK is the need for battery plants to be near where the cars are built and sold in order to reduce their carbon footprint.
Despite America’s Musk-driven head start and China’s dominant market share, Britain has the opportunity to become a power in the sector and latch on to the strong demand for localised battery production.
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