Bright Spark

Bright Spark

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In November last year, BMW announced it was moving production of its mighty eight and twelve cylinder engines from Germany to its plant at Hams Hall near Birmingham. On the face of it, that looks like a big vote of confidence in the British motor industry against the background of the uncertainty generated by Brexit and the spread of the Coronavirus. It’s also a welcome boost after BMW’s previous 2019 decision to supply engines to its South African plant from Germany rather than Hams Hall, as had previously been the case. That was intended to avoid post-Brexit difficulties importing South African built cars with high British content into the EU.

 

I certainly don’t think BMW would be sending this sort of top-end work to the UK if it didn’t think it would be handled well here, but the apparent good news has a distinctly double-edged quality. Because the reason BMW is making the shift is that it is refocusing its German plants on the production of powertrains for electric vehicles. As BMW itself points out, some of Hams Hall’s production is related to its electrification drive because the three-cylinder engines made there are used in the company’s hybrids, but it’s hard to avoid the feeling that the UK operations may now be in the slow lane for investment.

 

Which raises a wider question – can the UK motor industry, which has performed so well since the low point it reached in the late seventies, now attract the big investments it needs to make the switchover to electric? Investment levels in the British industry have been low since the Brexit vote in 2016. Manufacturers and suppliers will have to be encouraged to spend a lot more in order to re-equip the UK for a major change like electrification.

 

Honda is closing its UK plant at Swindon this year. The company’s explanation for the decision was the need to restructure its operations globally for electrification, rather than Brexit. On the other hand, you’d like to think that if the UK was a good place to make electric cars, Swindon would be one of the recipients of Honda’s EV investment, rather than one of the casualties. Tesla’s main investment in Europe is in Germany, but it’s hard to prove whether the UK was ever genuinely in the running for a Tesla plant to start off with. After all, Germany, although not a cheap location, is one of the world’s main centres for the development and production of cars, with a huge suppler base.

 

What of the UK’s existing electric vehicle production? Well for these purposes, you can ignore the flagship of British-badged EVs, the Jaguar I-Pace. That’s built by Magna in Austria – inside the EU – and presumably avoiding any post-Brexit complications, although Jaguar Land Rover has also invested in its UK plants for production of future electric models. There’s the Nissan Leaf, of course, which has been built in the UK for Europe since 2013 after a short period when early cars were supplied from Japan, and then there’s the electric MINI, which is built in the UK at BMW’s Oxford plant.

 

And the examples of the Leaf and the MINI highlight one of the main Brexit-related issues to do with EV production. While the batteries for the electric MINI come from Germany, Nissan set up a UK factory to supply batteries for the Leaf – although it has since sold off a majority stake in the plant to another company.

 

And where the battery pack, the most expensive component in an electric car, comes from turns out to be quite important. Although the UK’s trade deal with the EU secures tariff and quota free access to the Single Market for goods, a UK-assembled electric car with an imported battery pack might struggle to qualify as sufficiently “British” to benefit. The British government has managed to secure a six-year exemption from this aspect of the so-called Rules of Origin regime for UK-assembled EVs – but that’s very much a stay of execution rather than a permanent reprieve.

 

The obvious solution is a drastic increase in UK battery production. Will this be forthcoming in time? There are encouraging plans from Britishvolt for a UK battery gigafactory in Northumberland, but it would be comforting to see more. The UK car industry has a decent chance of making a successful transition to the age of electric, but it’s not yet in the bag.

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