82.The international EV market is growing rapidly. Sales of new EVs tripled between 2015 and 2017 and are expected to overtake ICEs during the late 2030s. This is a radical transition for a sector that has been dominated by ICEs since the late nineteenth century, and will be a significant challenge for incumbent manufacturers who must either adapt to new EV technology or lose market share. The implications are particularly important for the UK’s substantial automotive sector, which has built up world-class expertise in ICEs over many years, and which must overcome additional Brexit-related challenges to secure future inward investment.
83.In 2017 motor vehicle manufacturing contributed close to 1% of the UK’s economic output and 8.1% of UK manufacturing output (£15.2 billion). It also accounted for 13% (£44 billion) of the UK’s total goods exports. 186,000 people are employed directly in automotive manufacturing, and 856,000 across the wider industry. When questioned on prospects to accelerate the UK’s ambitions for EVs, the Minister explained to us that since “the British car industry is invested in existing technologies … We [the Government] do not want a revolution”. However the evidence we have heard, and the market projections we have seen, suggest that a revolution is already underway at the global level. Remembering that 80% of vehicles produced in the UK are exported, domestic ICE manufacturers must adapt if we are to protect jobs and retain UK share in the worldwide automotive market.
84.Although UK EV production remains in its infancy, it has already demonstrated the potential to be a major player: in 2016 the Sunderland-manufactured Nissan Leaf represented 20% of all battery electric vehicles sold in the EU, while exports of low emissions vehicles more broadly were worth £2.2 billion. Other EVs produced in the UK include the London EV Company’s TX black cab - the only purpose-built electric taxi worldwide - and inner-city transit buses made by Alexander Dennis and Wright Bus. Domestic production is set to increase further in the near future: BMW will start manufacturing a fully electric Mini in Oxford in 2019 and Toyota has recently announced plans to build a plug-in Auris in Derbyshire. However, as we heard during our previous inquiry into the impacts of Brexit on the automotive sector, there are real risks that increased policy uncertainties could undermine the case for future investment in the UK, especially in the event of a ‘no deal’ scenario.
85.The rapid growth in EV demand internationally is largely credited to dramatic reductions in battery costs. These have occurred as a result of technological improvements and economies of scale that have been realised due to increased demand from stationary storage, as well as from EVs themselves. Lithium-ion battery prices dropped from $1,000/kWh in 2010 to $209/kWh in 2017, and are projected to fall to below $100/kWh in the mid-2020s (Figure 5). Batteries currently account for around half the price of new EVs, and represent a significant industrial opportunity in their own right. The global lithium ion battery market was worth $17.4 billion (£12 billion) in 2017, and is expected to reach around $95 billion by 2025. The Government estimates that the UK and European battery markets could be worth £5 billion and £50 billion by the same date. Japan, South Korea and China currently dominate the battery market, respectively representing 48%, 27% and 25% of global supply in 2016. China also leads on EV production, with 43% of supply, followed by Germany (23%) and the US (17%).
86.There is widespread interest in developing battery-related production lines and services in the UK. The Government intends to set a UK content target for ultra low emission vehicles that is at least as ambitious as that for automotive more broadly (50% by 2022), with a view to securing battery manufacturing in the UK. The Faraday Battery Challenge seeks to enable this, by developing UK battery expertise and attracting inward investment, in order to deliver on the Industrial Strategy aim of making the UK a world leader in both EVs and EV batteries. The Challenge will provide £246m of Government support over the course of four years, part-matched by industry, to set up: the Faraday Institution (an independent battery research, science and training centre); the UK Battery Industrialisation Centre (to enable companies to rapidly develop manufacturing capabilities for their battery technologies to get them to market quickly); and the Faraday Battery Challenge Innovate UK programme. The Government has also committed £500m over 10 years for the Advanced Propulsion Centre, to be match-funded by industry. This will research, develop and industrialise new low-carbon automotive technologies.
87.While we welcome the Government’s proposals to support the growth of the EV and battery industries through the Automotive Sector Deal and the Faraday Challenge, it is not clear that the scale, duration and focus of support will be sufficient for the UK to overtake competitors that have adopted much stronger policy signals. EVs are proving a disruptive force in the global automotive sector, with battery expertise providing a springboard for new entrants, particularly in Asian countries which have not historically played a major role in car manufacture. We heard from BYD that the EV transition could plausibly lead China to dominate global car manufacturing in the longer term.
88.The UK will need to establish a strong policy position to counter these trends, with an attractive domestic market for EVs. We heard that the Faraday Battery Challenge should be extended from four to ten years, to reflect the scale of transformation required across the sector, and that the UK should seek to develop niche expertise in high-value aspects of the EV supply chain where we already hold a comparative advantage, rather than competing with established leaders in battery manufacture. Potential focus areas include battery design and development, electrolyte manufacturing, traction motors, lightweight materials, and power electronics.
89.We welcome the Government’s ambitions on EV and battery technologies, and its investments so far through schemes such as the four-year Faraday Challenge. However, more support is needed to ensure we retain our status as an international automotive leader, and to minimise the economic impacts of declining ICE trade through the 2020s. It is important that as any jobs in ICE production are lost, so new ones are created in EVs, batteries and associated technologies. We recommend that the Government set out a longer-term, 10-year strategy for batteries to help the UK to take a lead in this technology. If we do not act other countries will go first, and there is a risk that part of the UK automotive sector’s market share could be lost to emerging EV leaders. Funding for R&D should focus on areas where UK has existing strengths and so a realistic chance of taking a lead, for example in battery design and development, electrolyte manufacturing, traction motors, lightweight materials, and power electronics.
90.When a vehicle reaches the end of its life, it must be disposed of through an Authorised Treatment Facility. Under the EU End of Life Vehicles Directive, vehicle manufacturers have an obligation to provide free take-back for cars and light commercial vehicles; these obligations are met through partnerships with companies which take back vehicles and issue a ‘certificate of destruction’. Vehicles are then disposed of and parts are either re-used, recycled or used for energy recovery. Unite, SMMT and Axion Recycling, amongst others, identified potential for the UK to take a lead in end-of-life EV services, which remain less developed than those for ICE vehicles. This could include second life applications for batteries that are no longer suitable for in-vehicle use, disposal and recycling of entire vehicles—for which EU legislation will guarantee demand—or more specifically the recycling of batteries.
91.Vehicle manufacturers are already actively exploring and piloting second-life applications for batteries, which must be replaced in cars once their capacity degrades beyond around 70%. Potential applications include electricity storage for on and off-grid sites, in combination with renewables, to provide commercial grid-balancing services, and to support vehicle charging in remote locations. HSSMI, a manufacturing innovation institute, is exploring additional uses such as storage for rail and marine applications. We heard that second-life applications should be prioritised over recycling in the first instance, as processes to extract core materials from batteries are currently expensive.
92.Materials recycling may be important in the longer term, as the stockpile of batteries requiring disposal increases and particularly if anticipated materials shortages come to fruition. The risk of cobalt shortages has been identified as a major threat to global EV growth over the 2020s; according to the IEA, cobalt demand for EV batteries could increase by between 10 and 25 times by 2030. There are currently no UK treatment plants for disposal of batteries and only a single plant for processing lithium-ion batteries in continental Europe. The plant owners, Umicore, have invested £25 million in the plant and are piloting a process for the recycling of electric vehicle batteries in anticipation of a sizable market by 2025. Further facilities will be required as the number of EVs being retired increases. Witnesses agreed that disposal options for batteries needed to be addressed by policy, but had mixed views on whether the Government should seek to gain a lead in the development of second-life and battery recycling industries in the near-term. Nissan cautioned that timing would be important, to avoid scaling-up new industries before a steady supply of retired batteries is available.
93.Second life battery applications, EV end of life disposal and battery recycling are nascent areas that could offer significant industrial opportunities. We recommend that the Government explores the potential value of these to the UK and take a lead in developing those that are promising, before other countries gain a competitive edge.
94.We welcome the provisions of the Automotive Sector Deal, published in January 2018, which provides a framework to develop new EV manufacturing and in particular battery technology. However, we heard from industry that the deal gives insufficient consideration to changes needed across the whole automotive supply chain—from R&D through to after sales and disposal—as well as how the transition away from ICE vehicle production can be supported in a way that is not disruptive to the workers and communities that depend on it. In particular, witnesses emphasised the current shortage of personnel qualified to work on EVs, and the need to help the existing ICE workforce to reskill, both to make up the existing shortfall and to facilitate the longer-term EV transition.
95.There are substantial technological differences between EVs and conventional petrol and diesel vehicles. The advanced transportation consortium CALSTART has estimated that up to 70% of an electric vehicle‘s components may be different from a petrol-powered vehicle, and future vehicles are expected to have increasingly sophisticated software, electrical and electronic systems. Witnesses from across the automotive sector identified a shortage of personnel with the necessary skills to develop, produce and maintain EVs.
96.A 2016 assessment by the Automotive Industrial Partnership identified in particular a shortage of maintenance technicians, “specifically those who are multi-skilled in all three areas of mechanical, electrical and electronics”. At present only 1,600 technicians nationwide are qualified in electric vehicle and hybrid maintenance, and they are almost exclusively employed within manufacturers’ franchised dealer networks. This has ramifications for the cost and convenience of repairs, insurance and—most concerningly—the safety of untrained mechanics who may unwittingly risk their lives whilst attempting to repair electric vehicles. We heard that the lack of skilled personnel means that many dealerships around the country are reluctant to sell EVs, and that even those that do are often unable to service them.
97.In addition, Unite and the UK Petroleum Industry Association highlighted the need to protect workers and communities dependent on the ICE supply chain. They called for support both to reskill the workforce, and preferential fiscal and/or credit rates to encourage manufacturers to repurpose existing ICE factories rather than moving production abroad.
98.Vehicle manufacturers and EV consortia have made some headway in skilling-up the existing ICE workforce. Initiatives include: manufacturer-specific training (Nissan); a dedicated EV breakdown service (Nissan), a central knowledge hub to which dealers can address inquiries (Jaguar); brand-neutral advice for dealers (EV Experience Centre). However, the availability of support varies both regionally and by manufacturer. Motoring institutions, the Energy Saving Trust and Nissan suggested that the UK would benefit from a more coordinated approach, for example a national skills strategy to ensure that market opportunities are fully realised and that best practice advice and support is made available to motorists. This could even seek to develop a surplus EV skills bank to increase the UK’s competitive edge in manufacturing, in anticipation of demand taking off as prices fall - Germany is currently taking this approach.
99.The Institute of the Motor Industry, Unite and BMW emphasised the need to develop new qualifications/regulations for EV technicians, suggesting that formal accreditation or a ‘license to practice’ would provide confidence to drivers and help to protect both employers and workers. We welcome the Road to Zero Strategy’s acknowledgement of these concerns and the commitments to review the adequacy of existing regulation to protect mechanics and to work alongside the IMI to ensure mechanics are well trained; we recommend the Government further develops EV-specific qualifications for mechanics and engineers. The intentions of the Automotive Sector Deal to develop EV and battery manufacturing are also helpful, but the Deal does not go far enough in providing support for actors across the supply chain to transition from ICE to EVs. We recommend Government and business work together to develop a clearer joint plan to help companies repurpose ICE manufacturing facilities, to help workers develop new EV skills, and to ensure that independent dealerships and mechanics are equipped to advise on buyers on EV options and to conduct repairs safely. This will be essential to help the UK automotive sector retain top-level expertise and relevance as global demand moves from ICEs to EVs.
196 Bloomberg, (March 2018)
198 SMMT, (June 2018)
201 SMMT, (October 2018)
203 London Taxi Company , LEVC , BYD UK Ltd 
204 Unite the Union ; ’ Financial Times, 28 February 2018
205 Business, Energy and Industrial Strategy Committee, Fifth Report of Session 2017–19, , HC 379
206 Clean Technica, (December 2017)
207 Bloomberg, (March 2018); Bloomberg New Energy Finance, , (May 2018)
208 Cision PR Newswire, (March 2018); Grand View Research, (August 2017)
209 GOV.UK, (March 2018)
210 International Energy Agency, (May 2018)
212 Financial Times, (July 2017); Financial Times, (February 2018); Nissan , Innovate UK , Zero Carbon Futures  Centre for Business in Society , MAL (Research & Development) Ltd , Professor Ali Eftekhari , SMMT , CDT Energy Storage , Unite the Union 
213 Department for Transport, (July 2018)
214 GOV.UK, (March 2018)
215 GOV.UK, (March 2018)
216 HM Government, (2018)
217 Japan Times, (April 2018); International Energy Agency, (May 2018); Financial Times, (March 2017); Zero Carbon Futures , Unite the Union , Addison Lee  , Anglo American  , Axion Recycling , WWF-UK [; Q282 Toyota
218 International Energy Agency, (May 2018);
220 Innovate UK  ,
221 Zero Carbon Futures 
223 European Commission, (2017); SMMT, (2018)
224 ; SMMT , Axion Recycling , CDT Energy Storage (), E.ON , Unite the Union ,
225 ’, Clean Technica, 31 August 2017; Nissan [;
226 Harold Dermott and Associates , Innovate UK , CDT Energy Storage ()
227 GOV.UK, , November 2017
228 Axion Recycling 
229 Bloomberg, (March 2018); International Energy Agency, (May 2018)
230 Axion Recycling ; (September 2017)
233 HM Government, (2018)
235 Annex 1, Institute of the Motor Industry , Energy Saving Trust , Zero Carbon Futures 
236 Unite the Union 
237 Annex 1, Institute of the Motor Industry , Energy Saving Trust , Zero Carbon Futures 
238 Automotive Council UK, (February 2016)
239 Institute of the Motor Industry, (February 2017)
241 Zero Carbon Futures ; Annex 1
242 Unite the Union ; UK Petroleum Industry Association 
243 Annex 1
244 Energy Saving Trust ; Institute of the Motor Industry ; SMMT ; Nissan 
246 Institute of the Motor Industry ; ;
Published: 19 October 2018