A £1.2bn project to build Britain’s first ‘gigafactory’ to supply electric batteries for the UK car industry could unravel without changes to UK state aid rules, according to the company’s chief executive.
Orral Nadjari heads up Britishvolt, which is close to submitting formal applications to build a so-called ‘gigafactory’ at two potential sites in South Wales and southwest England.
The scheme, which could create 3,500 jobs, could prove critical to plans to protect the industry after Brexit as the UK aims to phase out all sales of petrol and diesel vehicles by 2035.
But Mr Nadjari said changes to UK state aid rules are essential to ensure the viability of the scheme, which is competing directly with a string of big projects in the European Union. Unlike Britishvolt, these are receiving generous government funding and support packages worth hundreds of millions of pounds.
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He said: “We need to have something similar in the UK otherwise battery manufacturing will not be based here… The UK Government needs to recognise how critical building a gigaplant is to the nation’s economy and UK automotive industry, this benefit is even more amplified if you encompass localisation of upstream manufacturing in the materials supply chain."
Rival projects such as Northvolt in Sweden have been designated under a special EU scheme created in 2017 which allows them to bypass EU state aid rules, as so-called Important Projects of Common European Interest (IPCEI).
He said: "IPCEI in Europe allows intervention by nations outside of EU state aid rules."
Mr Nadjia added that under existing rules, the UK Government can legally provide less than £40m in support for the Britishvolt project to build a £1.2bn battery plant.
In contrast, Sweden’s Northvolt has been backed by Volkwagen, Goldman Sachs and Daniel Ek, the billionaire founder of Spotify, has been granted a €443m (£402m) loan guarantee from the German government, additional funding from the Swedish Energy Agency and a €350m loan from the European Investment Bank.
The European Commission recently approved nearly $3.5bn (£2.7bn) in funding for the electric-vehicle battery supply chain.
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Belgium, Finland, France, Germany, Italy, and Sweden are participating in the IPCEI program which is being coordinated by the European Battery Alliance, which includes more than 400 industrial companies and agencies from mining to recycling.
Because the UK is not part of the scheme and has left the EU, Britishvolt will not have access to it and is instead in talks with the UK Government about alternative forms of support.
Currently, only 3pc of the world’s lithium-ion battery manufacturing capacity is in Europe with the lion’s share in Asia and the US.
But Europe’s big carmakers are waking up to the problem and are eager to build their own EV supply chain — from lithium mining to battery assembly.
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Top carmakers including BMW, Mercedes-Benz, Jaguar, and Volkswagen are investing tens of billions of dollars in a bid to catch up.
Britishvolt has said it would look to raise money for the project through the Government’s Automotive Transformation Fund. It was reportedly considering mulling a public listing for the first quarter of 2021.
The EU hopes that as many as 30 gigafactories will be operational across the bloc by 2030. Should Europe reach its goal, it will have enough power to build around nine million electric vehicles a year, according to figures from data group Benchmark Minerals.
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