In the wake of the government’s budget announcement, concerns that the UK is not doing enough to support its automotive industry through the electrification process are mounting.
German-headquartered car manufacturer Volkswagen (VW) recently announced the closure of three of its factories in Germany, spurring head of transport at the Energy & Climate Intelligence Unit (ECIU) Colin Walker to comment that it should be clear to “anyone concerned about the future prosperity of the UK’s car industry that slowing down the transition to EVs will only serve to hasten its demise”.
“Its future hinges on it making a rapid and successful transition to electrification and government will need to support in that.”
A report commissioned by the ECIU from Netherlands-based CBI Analytics at the start of October found that gross value added (GVA) contributions of the automotive industry to the UK economy could vary by over £50 billion, depending on how rapidly the sector transitions to the manufacture of battery electric vehicles (BEVs).
The total GVA contribution of the UK automotive sector could rise by 35%, or £16.1 billion, under a maximalist scenario or decrease by 73%, or £34.1 billion, under a worst-case scenario.
Around the same time, figures from the Society of Motor Manufacturers and Traders (SMMT) showed that September saw demand for BEVs hit a new record volume, achieving a 20.5% share of the overall market.
The announcement that £2 billion in investment funding will be given to the automotive manufacturing sector across the next two years, a move which Reeves says is intended to boost growth in the EV sector, comes as the volume of all vehicles manufactured in the UK is dropping.
According to Walker, who commented on the budget announcement, about 80% of cars produced in the UK go abroad, “the majority to markets that are rapidly shifting to EVs”.
He added: “If our car industry isn’t able to retool itself to meet these changes in demand, the consequences could be severe. In committing this £2 billion in support, the Government clearly recognises that the future of our automotive sector hinges on it making a successful transition to building electric vehicles.
“However, given the vast levels of support and investment that other countries are providing their automotive industries, the question has to be, is this £2 billion enough?”
SMMT estimates that to offset the underlying lack of consumer demand, manufacturers are on course to spend at least £2 billion discounting EVs this year. Given the money already invested to develop and bring these models to market, the situation is “untenable” and threatens manufacturer and retailer viability.
