Mini-leap launches UK electric vehicle industry, but bumpy road ahead

BMW helped jumpstart Britain's stagnant car industry with a £600 million revamp of the Mini plant in Oxford.

This ends months of speculation about the future of Mini production in the UK, and brings total investment in electrification of the UK car industry in recent years to more than £6 billion.

The Cowley plant will produce electric versions of the 3 two-door Mini Cooper and the new Aceman, a «small» SUV, expected next year. By 2030, production volume will be 100% electric vehicles.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), called the announcement «another vote of confidence» in the British carmaker.

It comes days after the Vauxhall Stellantis owner began production last week electric vehicles (EV) at its Ellesmere Port plant, which itself is the beneficiary of a recent £100 million cash injection from its owners.

However, looming EU trade post-Brexit tariffs and questions about UK battery production mean question marks still hang over the car industry.

UK car manufacturing faces major challenges amid net zero drive , the related shift to electric vehicles and questions about its competitiveness compared to its peers. China, Germany and the USA.

1209 electric vehicles and conventional engines produced

UK car production is still down 30% on pre-pandemic levels due to a combination of lockdown policies and shortages of critical components such as computer chips.

SMMT figures show how the electric vehicle revolution is gathering pace. however. Between 2018 and 2022, the number of electric or hybrid cars built in the UK increased by 69%, reaching 234,066 last year.

More than 7,400 Mini electric cars were registered in the UK last year, making it the sixth most popular electric car in Britain behind Tesla, Kia and Volkswagen.

However, the industry risks facing a blocker. in the form of batteries.

The Faraday Institution, which researches and commercializes battery technology, says Britain will need more than 100 gigawatt-hours of batteries per year to meet forecast demand for electric vehicle production by 2030. Today, the UK produces just 2 gigawatt-hours of electric vehicle batteries per year.

Nissan and Tata, the Indian group that owns Jaguar Land Rover, have announced plans to invest billions of pounds to build giant factories in Britain. But much more capacity will be needed.

1209 predicts batteries will be made in the UK

Milan Nedeljkovic, BMW's board member for manufacturing, said parent company Mini has no plans to set up its own battery plant in the UK. However, he added: «We have to solve this supply problem as well.»

Nedeljkovic said BMW was «working very intensively with our supply base to create the best conditions for our production here in the UK» and is open to supply batteries from Europe.

The Oxford Mini plant is currently open relying on Asian suppliers, including two Chinese battery manufacturers.

Monday's announcement overshadowed a growing political row over Britain's relationship with China, the world's largest supplier of electric vehicle batteries. The arrest of a suspected spy working for Beijing at Parliament House has sent shockwaves through Westminster.

At a press conference at the Mini plant in Cowley, Business Minister Kemi Badenoch defended continued business ties with China.

p>“At the moment, China is the leader in this technology. We can't achieve what we want to achieve with zero net results if we stop Chinese products,” she said.

Despite Whitehall's fervent hopes, building a financially sustainable electric vehicle supply chain in the UK has so far been a slow and frustrating process.

China accounts for half of the world's electric vehicles

Earlier this year, Britishvolt plans to build a gigafactory in UK collapse after the company fell into administration despite promises of £100 million in government support.

Acknowledging the mini-factory's century-long presence in Oxford, Nedeljkovic noted that industrial heritage should always play second fiddle to a «profitable business case.»

«It's about how much you can invest and your return on investment,» he said.

Questions about investment come with scrutiny of government subsidies, which for the electric vehicle industry are largely distributed from the £1 billion Automotive Transformation Fund.

BMW is believed to have received around £75 million in government support to overhaul its factory and how long the Treasury can continue to issue checks remains an open question.

Darren Jones, former Labor MP week, the chairman of the parliamentary select committee on business and trade, wondered about the level of handouts for companies involved in electric vehicles.

In July he called for more transparency after Jaguar Land Rover opened its £4bn electric vehicle battery plant, which is reportedly being supported by £500m of taxpayers' money.

BMW said last year it planned to stop production of new electric vehicles at Cowley. because the plant was “not configured” for full-scale production of new equipment.

Business Minister Kemi Badenoch says the government is «proud to support the BMW Group's investment.» Photo: Chris Ratcliffe/Bloomberg

Automotive analyst Matthias Schmidt argues that BMW was «shamelessly playing the subsidy card, as many have done before them.» He points out that both Stellantis and Nissan have received financial support in recent years to support their electric vehicle factories.

Badenoch said the government was «proud to support the BMW Group's investment, which will deliver high-quality jobs, strengthen our supply chains and accelerate UK economic growth.»

However, Schmidt predicts Cowley's workforce will shrink despite to a BMW spokesman saying the company is «not talking» about any «changes in the number of employees» at the Mini plant.

Schmidt says, «Electric cars simply require fewer employees [to produce] due to fewer parts, fewer stations on the production line, and a more automated production process.»

Electric cars have no engine and therefore fewer moving parts. parts than their conventional counterparts. Fewer parts mean fewer people are needed on the production line.

Lurking in the background is the issue of EU trade tariffs, which pose a real threat to the entire industry.

Under current circumstances, post-Brexit rules that come into force from January will see vehicles traveling in any direction across the English Channel subject to a 10 per cent tariff if they do not comply with strict rules regarding the supply of local parts.

< Carmakers have warned that the policy could have devastating effects on trade as battery supply chains are nowhere near where they need to be. Manufacturers including BMW have called for the tariff to be delayed.

Professor David Bailey of the University of Birmingham, an expert on car tariffs, says he believes Monday's announcement signals a potential tariff cut from Brussels.

“There is a lot of pressure from both the UK and Europe from car makers in the [EU] Commission,” he says.

He believes it is unlikely that BMW will expand in the UK without any knowledge of how the political fight over tariffs is likely to end.

«There are those who admit that 'well, actually, it's self-destructive' because it means 10 per cent tariffs on imports and exports of electric vehicles between the UK and the EU,” he says. “Chinese cars will probably just outperform them; it would be counterproductive.”

Meanwhile, uncertainty remains. While BMW's £600 million investment in the Mini is a positive development for the UK, the road to industrial success remains rocky.