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Why the stakes for EV makers just got stratospheric

British car makers will have to tackle some crucial challenges around battery production if they are to survive in an era of electric vehicles.

Nissan’s announcement that it is proceeding with plans to develop a £1bn battery gig plant in Sunderland has been widely welcomed as a step in the right direction. Despite the factory’s massive scale, the UK will still have a significant shortage of battery production capacity – can the UK car industry survive?

The survival of the UK car industry depends on three key factors: investment in more gigafactories, investment in innovation and the ability to scale production in line with the growing demand for electric vehicles.

The UK government has recognized the importance of adding battery production capacity and creating a local ecosystem of suppliers and is already in talks with a number of car manufacturers about plans to invest in several more gigafactories. Plans for a new facility in Blyth, Northumberland, appear to be progressing well and have the backing of UK-based battery maker Britishvolt. In addition, plans were submitted in July by Coventry City Council for a new gigafactory at Coventry Airport, close to the UK Battery Industrialization Centre. A number of other potential projects are under discussion.

In order to remain competitive, UK carmakers will need access to a domestic supply of battery packs in the future, if only to avoid the significant costs associated with transporting these bulky components from Asia. For car manufacturers who plan to export electric vehicles to the EU’s 27 countries in the future, it is crucial to demonstrate that 70 percent of the value of a car battery, and even the car itself, is Great Britain or within the EU. from 2027. New, strict ‘origin rules’ will then come into effect.

The SMMT has forecast that the UK will have 12 GWh of lithium-ion battery capacity by 2025. However, given that it takes about 9 GWh of capacity to make about 100,000 EVs, and EV sales in the UK reached 108,205 last year, it’s clear that’s not nearly enough. To put the shortfall in perspective, by 2025, the lithium-ion battery capacity of other western countries, such as Germany and the US, is expected to reach 164 GWh and 91 GWh, respectively.

In addition to ramping up investment in gigafactory production, more investment in battery innovation is urgently needed. The manufacture of lithium-ion batteries relies on the supply of rare earth metals, including lithium and cobalt, both of which are finite resources and can only be obtained from certain countries. Investing in the development of alternative technologies, such as solid state or lithium sulfur batteries, could provide key safety and efficiency benefits, and research is also underway into other chemistries using zinc and sodium sulfur. Some scientists have turned their attention to lithium extraction from seawater, and a recently published study found that there are an estimated 230 billion tons of lithium in the ocean. Investing in innovation activity now can provide a competitive advantage in the future.

The third factor that could determine whether the UK car industry survives or not is the ability to scale up battery production in line with the growing demand for electric vehicles. This is actually not as easy as it sounds and requires a careful focus on supply chain management. Upscaling production will always bring economies of scale, and the same is true for gigafactory manufacturers. They will find that as they increase production, it becomes easier to negotiate competitive deals with raw material suppliers and secure their source of supply. But scaling up too quickly naturally carries risks. If they increase capacity too quickly, they could end up with excess inventory, which incurs costs. Alternatively, they may miss out on orders simply because they cannot deliver the required volumes without introducing a new production line, which can take several months.

For EV makers, the stakes have reached new heights. There is a need to continue investing in gigafactory battery manufacturing to supply their own mainstream EV production lines, while continuing to sponsor innovation by working with engineering partners to explore alternatives to lithium-ion batteries. Gigafactory manufacturers will also have to make sure that when the time comes, they’re ramping up just right.