The UK must take action to secure investments from battery manufacturers in order to stay ahead of the race to electrification, according to a report.
A report on UK electric vehicle and battery production potential to 2040 by the Faraday Research Institution, with support from McKinsey Energy Insights and the University of Oxford, found immediate action needs to be taken by the UK government and industry stakeholders to remain dominant in the growing electric vehicle (EV) market.
The study projects that the UK will be producing between 1.1m and 2m EVs by 2040, and that UK and EU demand for UK-produced batteries could reach the equivalent capacity of 4-13 gigafactories (60-200 GWh) per year by 2040. The first, and at the time largest, battery cell plant in Europe was built in Sunderland in 2010 and gave the UK an advantage in the EV production.
However, investments of £5bn-£18bn need to be made in new EV battery manufacturing factories by 2040 to ensure the UK’s domestic production capacity doesn’t fall behind other countries, according to the report.
Other European countries such as Germany, Sweden, Poland, and Hungary are working on attracting more battery manufacturers through incentives, such as tax relief economic zones and government funding programmes, said the report.
International battery manufacturers such as LG Chem, Samsung, SK Innovation and CATL have increased production in Europe, and Faraday estimates capacity will reach 130 GWh per year six years from now.
If the UK's domestic battery supply fails to increase to meet national EV battery demand and became 100% reliant on overseas suppliers, annual UK imports could rise by £5bn-£12bn per year by 2040, warned the report.
Faraday said the UK risked not being able to meet EV battery demands in the mid-2020s if investment decisions in battery cell plants don't begin soon. This is due to battery plants taking approximately five to seven years to reach operational capacity.
The UK government and stakeholders need to ensure an increase in the existing EV manufacturing base as battery firm executives said “proximity to customers” was a key factor when choosing where to invest, according to the report. Other factors included investment incentives, licensing arrangements, the availability of cheap and clean energy and a skilled and productive workforce.
While the UK government recently provided £25m funding towards electrification projects in the automotive sector, Brexit uncertainty remains a barrier to manufacturers' investment decisions.
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