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Prime Minister Rishi Sunak has little room to spend to support what’s left of the UK’s auto manufacturing base.
Chancellor of the Exchequer Jeremy Hunt last week announced £55 billion ($66.7 billion) in tax increases and spending cuts in what the free market think tank called a “recipe for systematic austerity”.
Among them: plans to start subjecting EVs to road tax in the coming years.
The UK’s austerity push adds insult to injury caused by Brexit, which has plunged the country into a long period of uncertainty and delayed automotive investment.
During the 12 months leading up to the 2016 referendum, Britain produced around 1.7 million cars. In the past year, automakers have produced less than half that.
“We are witnessing the slow-moving car crash of the UK auto industry,” said David Bailey, professor of business economics at the University of Birmingham. “Britain had an industrial strategy, but now the government seems to be standing on the sidelines.”
The UK’s struggle to modernize its auto industry threatens thousands of industrial jobs as the change redraws the map of where cars are manufactured.
BMW said last month that it would move production of the electric mini hatchback from Oxford, England, to China.
Honda closed its car factory in Swindon last year, leaving Britain with just four major manufacturers: JLR, Nissan, BMW and Toyota.
The UK boasted the world’s second-largest auto manufacturing base in the 1950s.
It has since fallen to 18th place, behind rivals including Canada and Slovakia.
Domestic demand isn’t a reason to stick around – companies are on course for their worst year of sales since 1982.
Even more worrying is that the UK lacks the necessary battery supply chain to support mass production of EVs.
There is only one reasonably sized cell plant operating in the country, owned by China’s Envision Group, and it has failed to attract investment in additional large-scale facilities.
BritishVolt was at the center of plans for a factory to supply batteries for millions of electric cars in the north of England. But the startup, backed by mining giant Glencore, is now looking for funding to go ahead in early December.
The struggles of a company less than three years old create a chicken-and-egg dilemma. Automakers in the UK will be reluctant to build new factories or remanufacture existing ones unless they can source battery cells nearby. Battery manufacturers, in turn, are unwilling or unable to invest without predictable consumer demand or major government support.
Unlike its Swedish rival Northvolt, which has contracts worth about $55 billion with leading automakers, Britishvolt has not received large-scale orders.
While the company has signed outline agreements with Aston Martin and Lotus, neither of the two small-volume manufacturers have made firm commitments.
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