West’s push to EVs risks empowering China

The number of new cars made in Britain fell to just over 775,000 in 2022, we learnt last week, down from 860,000 the year before. That’s a 30-year low.

Lingering supply chain issues have extended the struggle to source components, not least semiconductors. Manufacturers across a whole range of sectors continue to feel the impact of lockdown-related shortages, right across the world.

But UK carmaking has also been hit by factory closures – including Honda’s Swindon plant, which until it shut in July 2021 delivered 160,000 vehicles per annum. While car production dropped 10pc over the 12 months to December, it’s 40pc down on 2019 – the last full year before the pandemic, when production topped 1.3m.

Yet since these UK car output figures were released last Thursday, attention has focused less on the dismal industry-wide picture and instead on the record 234,000 battery powered electric vehicles (EVs) made in Britain during 2022. That’s 4.5pc up on the previous year – a welcome contrast to the sharp fall in production as a whole.

Almost a third of new cars produced in Britain are now fully electric or hybrid – combining a conventional engine with EV batteries – up from only a tenth in 2020. Calls for a government strategy to accelerate domestic EV battery production are starting to get very loud.

Britain is set to ban sales of new petrol and diesel cars in 2030. New hybrids will be allowed for another five years. But after 2035, the only new cars and vans sold will be purely electric, plus any hydrogen-powered cars that may exist at that point.

The European Union and US have announced similar rules, with a slightly less ambitious timeframe.

That’s why the headlong rush we’ve seen towards EV production is now turning into a stampede. But because it makes sense to build such vehicles close to where the heavy battery packs are manufactured, there is now a huge focus on expanding domestic battery production, to secure the future of carmaking in the UK.

Britain so far has only one gigafactory, opened by Nissan in 2012, next to its carmaking plant in Sunderland. Capable of producing enough batteries in a year to store energy totalling 1.7GWh – hence the name – the facility was sold to the Chinese giant Envision in 2019.

While overall production has plummeted, numerous industry sources tell me that as EV output expands, UK-based manufacturers could soon get back to pre-pandemic levels, making more than 1m cars a year. That’s important – the industry employs about 800,000 people, including secondary domestic supply chain jobs away from the production front line.

But getting back to a million-unit plus car industry, based on EVs, would require massively expanded domestic battery output.

Estimates vary but we’re probably looking at 100 to 150 GWh a year – compared to the current total of 1.7 GWh at the existing Envision plant.

This technology is developing, and a huge upgrade is planned by Envision, boosting annual production at Sunderland to 38 GWh. But there’s still a very long way to go.

Britishvolt – a start-up backed by mining giant Glencore – has been trying to raise capital to build a 30 GWh battery plant in Cambois, near the port of Blyth, just north of Newcastle. That would certainly help in filling the looming hole in UK EV cell production.

Cambois is a highly attractive site, already hooked up to the national grid and benefiting from proximity to some of the world’s best offshore wind facilities – enough to power multiple gigafactories. But Britishvolt apparently failed to raise enough private capital to unlock £100m of government funding – and fell into administration earlier this month While other suitors are showing interest in the Cambois site, I can’t help thinking potential investors are mindful of how keen ministers are to expand EV battery production.

With this long-awaited plant still barely beyond the planning stage, the key role of the North East in the UK’s “green industrial revolution” seems less convincing.

The broader levelling up strategy, in fact, key to this Government’s electoral fortunes, is then called into question – less a serious set of policies than a campaigning slogan. I suspect investors are waiting for ministers to up the stakes, pledging more – much more – than £100m of public money, to get “spades in the ground” at Cambois before the next general election. The collapse of Britshvolt has also raised questions about the pace of the move towards EV. Is the UK ready for the looming 2030 deadline? Is the EV route really the best way to go?

At the most basic level, Britain is lagging badly when it comes to creating the infrastructure for an EV-dominated economy. Just 9,000 additional charging points were built during 2022 – a year when the UK produced almost a quarter of a million EVs, albeit some were exported.

But while there were just 16 EVs for each charging point in 2020, as production and ownership has expanded, there are now 30 – massively increasing so called “range anxiety”, with drivers likely to wait much longer before being able to recharge en route.

If the charging infrastructure is fixable, what about the rare earth minerals needed to create EV batteries? Already, the price of lithium has risen fourfold since 2019. Also, cobalt has become 80pc more expensive while nickel sulphate has more than doubled.

The price of copper is also up more than 100pc over the last two years – building an EV, after all, requires about five times more copper than a conventional car.

With global EV sales on course to double to 31m a year by 2030, the demand for and price of these natural resources will surely sky-rocket. And many of them are found, in parts of the world that are, to say the least, somewhat tricky.

China commands around two thirds of the world’s lithium-refining capacity, rising to four fifths when it comes to cobalt. Maybe that’s why China is home to almost 80pc of the world’s EV battery making capacity.

Western politicians, and many consumers, have been quick to embrace the green-friendly virtues of electric vehicles.

But I cannot help but worry that we’ve embraced this still shaky technology without thinking through the bigger geopolitical picture.

‘What about rare earth minerals needed to make EV batteries? Many are found in parts of the world that are a tad tricky’