Brexit Britain trailing EU and China on battery supply chain key for EV sector

LONDON – The U.K. has set a fast pace in the electric vehicle race with its 2030 ban on sales of new fossil fuel-powered cars, and has offered £1 billion ($1.4 billion) to jump start its battery industry and associated supply chain.

But the cash and the headline-grabbing deadline — which is sooner than many other nations by several years — still leaves it trailing the European Union’s drive to create a supply chain and far behind China, the electric vehicle battery leader.

The stakes are high for Brexit Britain. To keep selling into the 27-nation EU without tariffs, the U.K.’s car industry, which employs 170,000 people, will need to ensure electric vehicles and the batteries that power them meet stringent rules of origin — with up to 70% of input in value terms coming from the U.K. or inside the EU.

With the 2030 deadline looming followed by a 2035 cutoff for hybrids, the U.K. needs more battery factories and fast.

Yet even Nissan’s plans for a 9 gigawatt hour (GWh) battery plant in the country — hailed by the government when it was announced in July — are dwarfed by two plants being built in Germany alone: Tesla’s 50 GWh plant near Berlin and Volkswagen’s 40 GWh factory near Wolfsburg.

“We have come rather late to the party,” said Douglas Johnson-Poensgen, chief executive of the U.K.’s Circulor, who has worked with Volvo Cars and others on building sustainable supply chains.

The Department for Business, Energy and Industrial Strategy (BEIS), which is at the heart of the U.K.’s EV investment drive, says it is ensuring the country remains a world leader in the auto industry.

“We remain dedicated to securing U.K. gigafactories, and continue to work with investors to progress plans to mass manufacture the batteries needed for the next generation of electric vehicles,” a spokesperson wrote in an emailed statement.

Meanwhile, the EU is powering ahead to catch up with China and transform its car industry, a major employer across the bloc, including in heavyweights Germany and France.

The bloc, which has proposed an effective ban on sales of new petrol and diesel cars from 2035, has allocated €2.9 billion ($3.4 billion) from 12 EU states to support new battery plants. European climate group Transport & Environment says the EU has 38 plants planned or being built, many benefiting from other support measures from the EU or individual governments.

The bloc has identified 42 companies, including U.S. company Tesla and Germany’s BMW, for specific roles in the battery supply chain and lifecycle, ranging from supplying raw materials to producing cells or recycling them.

Last year the European Commission proposed laws to ensure sustainable battery production, while Germany has passed a supply chain law on the lifecycle of batteries, with plants to stay close together — helping meet environmental rules and containing costs. Batteries are heavy items to transport.

The U.K. has yet to match this, although BEIS said it was working on implementing green goals for the auto industry and would publish an infrastructure strategy this year, including on vehicle charging, and proposals on road transport emissions.

Manufacturers say the country is not moving swiftly enough.

“The U.K. government needs to wake up and invest in the supply chain,” said Matt Windle, managing director of British sports carmaker Lotus. “We’ve got the knowledge, we’ve got the people, we just need the supply chain.”

Guy Winter, a partner at Fasken who has advised the government in the past, said the U.K. needed a “battery czar” to make sure the industry pulled together — a role played in the EU by European Commission Vice-President Maros Sefcovic since 2017.

Winter said failure to provide enough support, whether in the U.K. or the EU, would hand the race to China, which makes about three quarters of the world’s EV batteries.

Benchmark Mineral Intelligence (BMI) forecasts the U.K. needs at least 175 GWh of battery cell capacity by 2035 to supply around 3 million fully-electric vehicles. For now, it estimates the country is way off the pace, with only 56.9 GWh by 2030.

Among the plans, Britishvolt aims to build a 30 GWh plant by 2027. BMI has only included part of that in its target as it expects the British startup to ramp up more slowly.

Britishvolt said building a 30 GWh factory was a challenge, but a spokesperson said its strategy of building in three 10 GWh phases would help achieve its target by 2027.

To avoid EU tariffs, British-built cars must meet a range of rules on origin that from 2027 will include a stipulation that 70% of the battery pack comes from the EU or the U.K.

BEIS said the rules included a phase-in period.

But Winter said that might not give the country enough time. “We ended up with a period to achieve a transition which now looks too short,” he said.

So far, the U.K. has succeeded in nurturing small battery supply chain startups via projects like the Faraday Institution, which trains battery scientists and engineers, said Steven Meersman, founder of Zenobe — itself a startup that manages batteries on large EVs and extends their lives via energy storage.

But Meersman said the U.K. lacked a unified strategy to help startups grow and to regulate the EV chain, noting that one ministry handled incentives for buying EVs while a separate regulator managed the vital rollout of charge points.

The Critical Minerals Association, an industry group, has called for a “central coordinating body.”

The Advanced Propulsion Center, a government and auto industry venture, says it had expressions of interest from more than 120 groups for projects across the battery supply chain.

But its Chief Executive Ian Constance said the U.K.’s offer of £1 billion of funding, about half of which has been allocated so far, “will run out pretty quickly if we deliver a few of these projects”.

State subsidies globally average £750 million per battery plant, which can each cost between £2 billion to £4 billion, industry estimates indicate.