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The £600m investment by BMW in its Mini factory in Cowley near Oxford is fantastic news for the 4,000 workers whose jobs directly depend on the shift to electric vehicles.
But it’s also a very welcome development for Rishi Sunak, whose own job indirectly depends on any business announcements that show voters he’s helping to futureproof the UK’s economy in a post-Brexit, clean-tech age.
Business Secretary Kemi Badenoch could be forgiven for beaming widely as she appeared at the Cowley factory today, and there’s no question that the BMW announcement is the latest in a string of similar job-boosting moves.
In July, Jaguar Land Rover’s owner confirmed it would build a giant “gigafactory” to produce batteries in Somerset. Stellantis has just begun producing electric vans at its Ellesmere Port factory in Cheshire and Nissan is expanding electric vehicle capacity at its Sunderland factory. Ford is investing heavily in its Halewood plant, preparing it to build electric motors.
And in many cases, the key to the investment has been sweeteners from the Government. Citing commercial confidentiality, Badenoch was coy about ministerial hard cash linked to the Mini deal, but didn’t exactly deny a figure of £75m. Given the thousands of jobs, including many more in the supply chain, protected, that looks like a bargain.
Similarly, the Somerset gigafactory announcement was tied up with another effective subsidy, reported to be around £500m. Again, compared to the £4bn invested by Jaguar owners Tata and its long-term support for the wider UK car industry, that feels like Government money well spent.
What’s striking about the subsidies is that this is a Business Secretary, and a government, which has criticised similar state aid in the past, on the grounds that it distorts competition. With both Badenoch and Sunak calling themselves “Thatcherites”, they’ve been wary of a return to 1970s-style practice of Whitehall trying to “pick winners”.
Given that the United States, the biggest capitalist economy on earth, has embarked on its own massive subsidy programme in the shape of Joe Biden’s Inflation Reduction Act, and given that the EU has similar plans, it seems the UK has decided if we can’t beat ‘em, we have to join ‘em.
Former Business Secretary Greg Clark, who himself secured a vital Nissan investment after the Brexit referendum, has rightly pointed out that the Government seems to have an “industrial strategy” but seems allergic to using that phrase (even deleting it from the Department for Business’s actual title) for fear of being seen as too interventionist.
The risk is that given the global race to attract clean tech jobs, the UK is only playing catch-up with a series of ad hoc, emergency moves without which our car industry would die.
Badenoch may be a Thatcherite (not least in how brusque she can be towards fellow Tory MPs) but the latest deal underlines her reputation as a hard-nosed pragmatist. “We do have to do some investment ourselves as government,” she said, referring to state support. “We need to make sure that we don’t just sit back and allow the industry to wither.”
The Business Secretary was also right to highlight that German car manufacturers are as worried as British-based ones about new EU “rules of origin” for electric vehicles due to come into force next year. And that the UK now at least has total control over its own state-aid rules, which EU member states may struggle to unpick quickly.
Still, with the most avidly pro-Brexit Tory MPs appearing to also be the most “climate sceptic” Tory MPs, what worries some environmentalists is the sheer ignorance in Parliament about the basic facts of why investment in electric vehicles makes sense.
For many involved with electric car manufacture, those misconceptions were on display during the Energy Bill debate last week.
Backbencher Craig Mackinlay talked about “the true environmental cost of the batteries, the digging up of cobalt by children in the Democratic Republic of Congo… That is the real cost of relying on renewables.” Not only is cobalt used to refine petroleum, and in batteries for many consumer electronics other than cars, the motor industry is moving away from its use.
John Redwood said that electric cars used a lot of CO2 in their production and if not driven much the benefits would be questionable. Yet electric vehicles typically produce 65 per cent less CO2 than petrol equivalent.
One backbencher, who actually owns an electric car, has even written to constituents suggesting that “a modern combustion engine is more efficient”, even though the basic science contradicts such claims. But a petrol engine loses up to 84 per cent of its energy, compared to just over 10 per cent net for an electric engine.
Tory backbencher Richard Drax cited an article by Rowan Atkinson, in which the actor said he was ditching his electric car. “Mr Bean… is a car expert. He wrote a very good article in The Guardian about why we are not quite ready for battery cars.” But some of the claims in Atkinson article have been debunked, not least because it suggested electric trucks were a “non-starter”, when they’re a rapidly growing sector.
In fact, it’s the free market that is showing the direction of travel on this whole issue. Last week, the percentage of electric car registrations hit 20 per cent of the total for the first time. The second hand car market grew by 80 per cent in the last quarter, and the new registrations means that in three years’ time a flood of second-hand vehicles (the route to making electric travel affordable) will come on sale.
Yet the biggest risk to this burgeoning market seems to be the PM himself. When those car sales stats emerged last week, the car industry sounded a little-noticed alarm about uncertainty over the Government’s plans to end the sale of new petrol and diesel cars from 2030.
Mike Hawes, chair of the Society of Motor Manufacturers and Traders (SMMT), pointed out that we now have less than 120 days until 1 January, when the new Zero Emissions Vehicle (ZEV) Mandate is due to start.
A Government consultation earlier this year set out plans to start fining car firms who failed to make 22 per cent of their new cars (and 10 per cent of their vans) electric from 2024. Yet ministers have still to publish their final plans, prompting Hawes to say “business cannot plan on the basis of consultations, they need certainty”.
Many in the industry are increasingly nervous at the delay, amid concern that Sunak could misread his political “win” over the Ulez zone in the Uxbridge by-election. There are fears ministers could water down the ZEV mandate, even though the 22 per cent target may neatly match the demand from the public.
Because the statutory instrument enacting the changes would have to be voted on by MPs, it’s not inconceivable that the PM is running scared of his climate-sceptic wing.
The Department for Transport says that the Government response to its own consultation will appear “in due course”, but time is ticking away. Insiders tell me that the real sticking point is the DfT is still waiting for No 10 “sign off” for the plans.
Sunak may eventually give the full go-ahead for the 2030 ban, If he does, he could further bolster his claims that the UK is doing everything it can to help our car industry to not merely to survive but thrive.
If the PM continues to drag his feet, he won’t just risk being depicted as the Tories’ awkward Mr Bean. On the issue of the switch from polluting petrol to cleaner electric, he risks painting himself as Mr Has Been.
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