Industry trade

Battery deficit could lead UK to electric car


British Prime Minister Boris Johnson sits in an electric taxi in Coventry, Britain November 13, 2019. Ben Stansall / Pool via REUTERS

LONDON, June 22 (Reuters Breakingviews) – A looming battery shortage threatens to run the UK auto industry on a low charge. Faced with a ban on sales of combustion engines and impending import caps, the government needs a big boost in local production to persuade automakers like BMW (BMWG.DE) to stay on track.

Automakers Ford Motor (FN) and Nissan Motor (7201.T) and conglomerates LG (003550.KS) and Samsung (005930.KS) are in talks with Whitehall over building so-called gigafactories to produce electric vehicle batteries, according to Financial Times. It is crucial to ensure that there is sufficient domestic battery manufacturing capacity for Jaguar Land Rover and Toyota Motor (7203.T): car manufacturing accounts for around 13% of Britain’s goods exports .

Currently, the UK can only process 2 gigawatt hours per year, compared to around 49 GWh in the rest of Europe, according to Benchmark Mineral Intelligence. UBS estimates that electric vehicles will account for nearly two-fifths of European sales by 2025. That proportion could double by 2030 – the date Prime Minister Boris Johnson plans to ban sales of new gas guzzlers.

Applying UBS’s projections to the nearly two-thirds of UK-made cars sold in Europe and assuming 18% of the rest are carbon-free journeys – in line with estimated global demand – implies that UK automakers are expected to produce 381,000 electric vehicles in 2025, based on the roughly 1.3 million vehicles manufactured in total in 2019. This would require around 23 GWh, using figures from the Society of Motor Manufacturers and Traders. Companies like Britishvolt plan to build up to 70% of them, which could allow 250,000 battery motors, just one-fifth of pre-pandemic production. Even that probably won’t be available in time, as battery factories typically take five to seven years to reach full capacity.

Trade rules present another hurdle down the road. About half of British-made cars are shipped to the European Union. The Brexit deal stipulates that at least 55% of electric vehicle parts by value must come from the UK and the EU from 2027. Yet the necessary batteries, which currently come mainly from Asia, represent two-fifths of the financial value of a car, estimates the Faraday Institution. It wouldn’t take much for additional overseas-made components to break the cap, allowing Brussels to impose a tariff in accordance with World Trade Organization rules.

Johnson’s ambitious goal of limiting combustion engines is to be applauded. But a lack of electricity means the country could end up driving an electric car.

To pursue @CGAThomson on Twitter

NEWS CONTEXT

– Britain is in talks with six companies to build large factories to produce batteries for electric vehicles, the Financial Times reported on June 16, citing anonymous people briefed on the talks.

– Ford Motor, Nissan Motor, LG Corp, Samsung and startups Britishvolt and InoBat Auto are in talks with the UK government or local authorities over the location of potential factories and financial support, according to the report.

– The UK government’s plan to ban the sale of new gasoline and diesel cars by 2030 and hybrids by 2035 will force auto factories across the country to switch to electric model production.

– A spokesperson for the UK Department of Business said that “to support the transition of the automotive sector to electric vehicles” the government is “dedicated to securing the giga factories and continues to work closely with investors and automakers to advance plans for mass battery production in the UK “.

– So far there are 38 large battery factories planned in Europe, according to environmental lobby group Transport & Environment, with only Britishvolt’s project leaked in the UK, according to the newspaper.

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