What is behind the Great British Battery Bonanza?

FROM 2030, according to the government, each of the 2.3 million new cars sold in Britain each year must be electric. All will need batteries, the most complex component of electric vehicles and the hub around which their emerging supply chains revolve. In November last year, the government set aside £ 2.8bn ($ 3.9bn) to support the transition and ensure these supply chains pass through Britain.

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The result is a flowering of new battery factories that have emerged to meet demand and take advantage of subsidies. One, in Northumberland, being developed by a two-year-old startup called Britishvolt, is courting the government for hundreds of millions of pounds. Another, in Sunderland, is being developed by a little-known Chinese battery company called Envision, which is expanding the plant that now supplies Nissan, a Japanese automaker. Coventry City Council wants its own factory and has applied for a building permit to build one. The local authority has not yet decided which company should operate it.

The stakes are high. This is in part thanks to the conditions under which Britain left the EU. The rules of origin requirements of the Withdrawal Agreement mean that 40% of car components exported to the EU must be of British or European origin. In 2027, this figure rises to 55%. Since the battery is such a large part of the cost of an electric vehicle, if Britain cannot expand its battery manufacturing capacity, the resulting lack of access to the European market will cause it to lose manufacturers. automobiles, which would be expensive. The manufacture of internal combustion vehicles currently supports around 180,000 jobs.

New battery installations, and those to follow, face several challenges. Electric vehicles, by their nature, contain a higher proportion of electronic components than their fuel-powered counterparts. The manufacture of these components, and in particular batteries, which alone account for some 30% of the value of an electric vehicle, is dominated by Chinese companies. This means that the government subsidizes the operation of factories not only with much higher labor costs, but also with a technological handicap.

One alternative is to attract Chinese companies to British shores. So far, Envision is the only one with such plans. Contemporary Amperex Technology, by far the largest and most important of the Chinese operators, does not have public plans for a British factory, but does have plans in Indonesia and Germany. BYD, a Shenzhen-based electric vehicle and battery maker, might be an option. While attracting Chinese manufacturers to British soil is probably the best value for money, it comes with political baggage. Chinese investments in Britain are unpopular.

In favor of Britain’s aspirations is the fact that batteries are heavy, bulky, and flammable, and therefore relatively expensive to ship. Willy Shih of Harvard Business School says this means batteries won’t follow exactly the same path as solar panels and flat screens, two high-tech items whose production is dominated by China. Instead, it will make more sense to produce them close to their markets.

How well it works depends on the route the industry ends up taking. Tu Le, an automotive analyst in Beijing, explains that there are basically two possible paths. One is that Chinese companies have set up manufacturing centers around the world, like Envision’s in Sunderland, but keep their intellectual property, research and development in China, much like Apple does with it. the manufacture and design of smartphones. The other is a more traditional model where car makers drive innovation in batteries and power electronics for electric vehicles, and Chinese battery makers become mere suppliers.

If the traditional model prevails, British investment in batteries may well pay off. But if the future is one where Chinese manufacturers control the cutting edge technology behind electric vehicles, then UK battery factories will end up getting expensive, behind the technology curve and a waste of money.

This article appeared in the Great Britain section of the print edition under the title “Bonanza Battery”

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About Walter Bartholomew

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