The UK car industry’s prospects go from bad to worse

Prime Minister Rishi Sunak has less room to spend to support what is left of the UK’s auto manufacturing base.

Chancellor of the Exchequer Jeremy Hunt last week unveiled a £55 billion ($66.7 billion) set of tax hikes and spending cuts that a free market think tank called a “recipe for managed decline.”

Included within that: a plan to start subjecting EVs to road taxes in the coming years.

The UK’s austerity push adds insult to injury caused by Brexit, which plunged the country into a prolonged period of uncertainty and delayed automotive investment.

During the 12 months leading up to the 2016 referendum, Britain produced nearly 1.7 million cars. In the past year, automakers have produced less than half that.

“We are witnessing a slow-motion car crash of the UK auto industry,” said David Bailey, a business economics professor at the University of Birmingham. “Britain used to have 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 transformation redraws the map of where cars are manufactured.

BMW last month said it will move production of electric Mini hatchbacks from Oxford, England, to China.

Honda closed its car factory in Swindon last year, leaving Britain with just four mass manufacturers: JLR, Nissan, BMW and Toyota.
 
The UK used to boast the world’s second-biggest auto manufacturing base in the 1950s.

It’s since dropped to 18th place, behind rivals including Canada and Slovakia.

Local demand is not a reason to stick around — companies are on course for their worst year of sales in the market since 1982.

Even more worrisome is the UK’s lack of a substantive battery supply chain needed to support mass manufacturing of EVs.

The country has just one reasonably sized cell plant in operation, owned by China’s Envision Group, and has failed to attract investment in additional large-scale facilities.

Britishvolt had been at the center of plans for a factory in the north of England to provide batteries for millions of electric cars. But the startup backed by mining giant Glencore is now looking for funds to keep going beyond early December.

The less than three-year-old company’s struggles pose a chicken-and-egg dilemma. Automakers in the UK are going to be reluctant to build new factories or retool existing ones unless they can source battery cells nearby. Battery manufacturers, in turn, are unwilling or unable to invest without predictable customer demand or sizable government aid.

Unlike its Swedish rival Northvolt, which has signed about $55 billion in contracts with leading automakers, Britishvolt has not secured 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.