Britain faces carmaker subsidy war with EU
Electric vehicle market in UK risks being left behind as Brussels joins US in ramping up investment
BRITAIN’S electric car market risks being left behind as the EU ramps up a transatlantic subsidies war with the US, the Chancellor has been warned.
Brussels is preparing to unveil a package of measures tomorrow aimed at supporting renewable energy, electric vehicles and other green technologies, in response to similar measures in Joe Biden’s $430bn (£348bn) Inflation Reduction Act. The package is expected to loosen state aid rules, allowing individual member states to hand out more generous subsidies to prevent a stampede of businesses taking their investment to the US instead.
But experts fear Britain will be caught in the crossfire of a subsidy war and the proposals will leave it at a disadvantage as Germany, France and other wealthy EU countries pour cash into their domestic industries.
It has prompted calls for the Jeremy Hunt to unveil more measures aimed at ensuring the survival of the UK car industry in his Spring Statement.
Andy Palmer, the former boss of Aston Martin and chairman of battery company Inobat, warned that a subsidies war between the US, China and the EU was “already happening” and the package being drawn up by Brussels threatened to leave the UK trailing even further behind. The industry veteran, who also previously worked at Nissan, said: “The EU already offers better incentives than the UK today, without adjusting anything for the Inflation Reduction Act.
“If each country is allowed to do its own thing, it will make it even easier for countries like Germany to attract investment.
“It is already tough out there for the UK and it is about to get a lot tougher.”
Mr Palmer’s company Inobat is deciding where to develop a battery “gigafactory”, with Spain and the UK among the top candidates.
It expects to make a decision in the first half of this year but he warned: “The UK has soft advantages such as English law, the English language and talented people but there is no
competition on the incentives front, unfortunately.”
The Faraday Institution, a publicly funded body set up to monitor progress of the transition to electric cars, says the UK will need roughly five large battery factories to meet demand for the domestic car market. Only two are planned – including a project by Britishvolt, which recently collapsed.
A failure to secure the factories, around which future electric car supply chains will be based, could mean the death of Britain’s car industry, the institution has warned.
But car industry expert David Bailey, a professor at Birmingham University, warned that a company choosing where to put a battery factory today would probably put one in the US, or in central or eastern Europe, rather than the UK because costs are lower.
The warnings come days after industry lobby group the Society of Motor Manufacturers and Traders (SMMT) warned that more action was needed to ensure the success of Britain’s electric car industry in the face of large subsidies abroad. The US Inflation Reduction Act, which offers tax incentives to green companies and electric car customers, threatens to “suck up” investment, the SMMT said. Mike Hawes, boss of the lobby group, said: “You can’t just accept this laissez faire approach to investment. It’s not a level playing field.”
It comes as Ford has followed Tesla in cutting the cost of electric cars. Ford is reducing the price of its Mach-e Mustang car by $4,500 in the US.
A Treasury spokesman said: “The Government is taking significant action to encourage investment in renewable generation including committing £30bn to support the domestic green industrial revolution.”
Separately, Arrival, a struggling UK electric van start-up that is quickly running out of cash, said it will cut 800 jobs yesterday, halving its workforce.
The company, which has a factory in Oxfordshire, said the layoffs will reduce its costs to $30m per quarter, helping it conserve the $205m it has left.