UK Automotive Industry

– in the House of Commons at 5:33 pm on 18 September 2023.

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5.35 pm

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

I beg to move,

That this House
has considered the UK automotive industry.

It was only two months ago that I was standing in front of the House addressing a motion tabled by the Opposition on the UK risking losing the automotive industry. That is evidently not the case. With the Government’s lead, the UK continues to be one of the best locations globally for the sector. Votes of confidence in our economy have been showcased by three major automotive announcements in recent months.

The automotive industry is a vital part of the UK economy and is integral to supporting growth by creating high value added jobs across the country, enhancing export opportunities and helping to deliver the Government’s overarching goal of making the UK a global hub for innovation. In the span of just 10 weeks, the Government secured three major announcements on automotive, proving that the country is internationally competitive for vehicle manufacturing. These investments will secure green, high- quality jobs, strengthen our supply chains and boost economic growth. I am confident that more will follow.

The UK’s competitive business environment and regulatory system, combined with the Government’s targeted approach to support the enhancement of the innovation ecosystem, has attracted some of the most prestigious manufacturers to invest here. Last week, we celebrated BMW Group’s announcement that it is investing £600 million, which will bring production of two new all-electric Mini models to Oxford from 2026. It will enable the site to fully transition to electric vehicle production from 2030.

As my hon. Friend Justin Tomlinson and Anneliese Dodds will be aware, with the support of the Government, this investment will secure the future of the 4,000 staff employed at the Oxford manufacturing plant and at the body pressing facility in Swindon. BMW has been part of the UK auto manufacturing family since 2000, and by 2030 it will have invested more than £3 billion in our country. Our joint success story continues throughout the transition to electrification.

BMW’s announcement builds on last week’s good news that, following a £100 million investment, Stellantis has started electric van production in its Vauxhall plant in Ellesmere Port. This transformation is also historic, as it makes the plant the first all-electric vehicle facility in the UK and one of the first in Europe.

Photo of Rachel Hopkins Rachel Hopkins Shadow Minister (Defence)

The Minister and I have had many conversations on electric vehicle production, as she knows, but in January 2024—just some three months away—UK car and van makers, such as Vauxhall in Luton South, are facing 10% tariffs on exports of electric vehicles if they cannot source enough home-made batteries. That is despite the Government having had more than two years to prepare for the introduction of these rules of origin, which they negotiated. The Minister is aware of this, as I have raised it many times. With just over three months to go, can she just admit that she is failing our motor manufacturers and is willing to chuck them under the bus?

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

The hon. Lady started off appropriately by talking about how we work collectively on this issue. The rules of origin and tariffs were not just negotiated by us—there was another party at the table. The tariffs, if they are implemented, will impact not only on the UK car manufacturing sector but on manufacturers in Europe. As there are more cars imported from Europe into the UK, the burden will be far greater on those countries. The negotiation took place pre-covid and before Russia’s invasion of Ukraine. Of course, there is now a tight deadline, but negotiations with Brussels always go to the wire.

The important thing is this: we are negotiating hard for the UK automotive sector. Those manufacturers in Europe were also desperately trying to negotiate hard, because this impacts them just as much. Just as we have the Society of Motor Manufacturers and Traders—the automotive sector’s umbrella group—campaigning, they have groups campaigning in Europe. Just last week, there was a huge amount of news coverage about how Europe is now incredibly concerned about the flood of cheaper electric vehicles into its market. The argument we are making should definitely be taken to the EU, because the tariffs would impact car manufacturing in mainland Europe, too.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

The truth is that while gigafactories are now being built right the way across Europe, we need at least eight gigafactories with about 15 GW of capacity in the UK—including, I might say, one in the heart of the west midlands, which is home to about a third of UK automotive production. In the last Metro Mayor election, both the Conservative Mayor, Andy Street, and I promised that we would get that gigafactory built; it is still a large open space. When does the Minister anticipate those eight gigafactories being built in the UK? When does she anticipate a gigafactory coming to the Coventry airport site? If we fail, our automotive industry will be hit with tariffs soon and we will put 114,000 jobs in jeopardy.

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

The Tata gigafactory announcement ensures that we are front-footed when it comes to gigafactories—it will be one of the largest factories in Europe. The right hon. Member and the Labour party are obsessed with us needing five or eight gigafactories, but it is about capacity. It has been noted that we need, I believe, 89 GW by 2030, and with both Tata and Envision we are two thirds of the way there. That is how we need to compare with the rest of Europe: it is not about the number of factories; it is about the level of capacity that they provide. Even though we have those two in place, we are not complacent and will continue to do everything we can to secure further investment.

The right hon. Member talked about a particular site. Obviously, that will have to go through two funds within my Department, but we will always look at solid investment for even more gigafactory capacity in the UK.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

I am grateful for that reassurance, because this is one question on which both the Conservative Mayor and I would be happy to come and lobby on behalf of the west midlands. The point is that we are told that we need 130 GW of capacity in the UK by 2040. Now, that may be eight sites or it may be more or fewer, but the key thing is that we cannot see a plan for the UK getting that capacity in place, unless the Minister gets up and tell us that there is a plan that she is about to reveal.

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

The right hon. Member and, of course, the Mayor for the West Midlands lobby incredibly hard—as they should, because they have fantastic sites for potential gigafactories—and those negotiations will continue. I always used to say at the Dispatch Box that we needed 100 GW of capacity, but the figure is now 89 GW. Envision and Tata provide us with a solid footing to get up to the capacity that we need, but we will not be complacent; we will continue our work.

As hon. Members will hear throughout my speech, over the summer we put in place a consultation on a battery strategy. I believe that, outside Norway, no other European country has such a strategy. We are working to produce a strategy to ensure that we have substantial capacity in the UK. The Tata commitment is huge, and I will allude to that as well. I mentioned Stellantis, which has started electric van production in its Vauxhall plant in Ellesmere Port. That transformation is also historic, as it makes the plant the first all-EV facility in the UK and one of the first in Europe.

I turn to gigafactories, the favourite topic of Liam Byrne. In the summer, we also helped to secure more than £4 billion of investment from Tata for a new gigafactory. At 40 GW, it will be one of the largest battery plants in Europe, equivalent to the size of almost 65 football pitches. It will create up to 4,000 highly skilled jobs as well as thousands of further jobs in the wider supply chain for battery materials and critical raw minerals. Most importantly, the investment helps to turbocharge our switch to zero-emission vehicles by providing almost half the battery production needed by 2030. It is not that we need 12, 15 or five; it is about the capacity we need. Tata takes us two thirds of the way there and Envision is on top of that.

The announcements are the most recent in a line of investment decisions over the last couple of years. In 2021, Nissan and Envision announced a £1 billion investment to create an EV manufacturing hub in Sunderland. Ford joined the line-up in 2021 with a £227 million investment in Halewood to make the company’s first EV components site in Europe, and increased its investment in the plant to £380 million in 2022. Last year, we saw Bentley commit more than £2.5 billion to transition its Crewe plant to zero emission vehicles, with the first EV model to roll off the production lines around 2025.

Jaguar Land Rover has also announced that it will invest £15 billion over five years into its industrial footprint as part of its move towards electrification. That is great news for the west midlands and Halewood, where Jaguar Land Rover has production sites, research and development facilities and its headquarters. These investment decisions are votes of confidence from a highly productive and innovative sector, showcasing that the UK has the best to offer when it comes to green manufacturing and new and future technologies.

Photo of Paul Howell Paul Howell Conservative, Sedgefield

The Minister is listing some fantastic organisations and great businesses around the country, but their size is such that the businesses that supply them are massive organisations in their own right. I have Gestamp in Newton Aycliffe, a supplier of subframes to all over the world, from Nissan in Sunderland to Volvo China. They are huge businesses. Does the Minister recognise the importance of the supply chain, not just the headline businesses?

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

My hon. Friend is right that the supply chain is critical to ensure that we continue to manufacture at pace. Just last week, we “leapfrogged”—I believe that is the quote—the French to become the eighth largest manufacturer globally, which shows how important our supply chain is. There are kinks in the supply chain and a lot of pressure—the Inflation Reduction Act on one side, covid on the other—while trying to get hold of critical minerals for the base products. I have been working with industry, and we will publish an import strategy-supply chain piece of work soon to make sure that we are shedding light and doing everything we can for our advanced manufacturing sector.

We have a strong and valued relationship with the sector, stemming from the UK’s rich history in auto manufacturing.

Photo of Katherine Fletcher Katherine Fletcher Conservative, South Ribble

I am grateful to the Minister for sharing the litany of successes in our proud automotive industry. I gently remind her that automotive includes trucks, not just cars. She mentioned the history of our production; Leyland has been making trucks since Victorian times and has a proud history—we still see the signs. It is now investing in making smaller electric trucks, reconfiguring its factory and taking on apprentices. It is a huge part of the Leyland industrial community. Can I make sure that my hon. Friend does not forget the Leyland DAF group’s wonderful truck heritage?

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

My hon. Friend is a passionate advocate for Leyland. Even if I wanted to, I would not be able to forget the importance of Leyland and its history, and the truck sector. I hope she will forgive me for my reference to automotive, as we tend to bag everything in.

Photo of Katherine Fletcher Katherine Fletcher Conservative, South Ribble

The Minister is very welcome to come and visit.

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

I would love to. More importantly, I was recently at a site where we saw trucks that used hydrogen, ensuring that construction sites achieve their net zero ambitions. Leyland will not be forgotten, due to my hon. Friend’s hard work.

Although we are not reinventing the wheel, we are witnessing the biggest transformation this sector has gone through since the first Ford models came off the production line. New vehicle technologies are emerging and shaping our understanding of mobility daily.

In the transition, the UK’s aim is to lead the future by creating it. Our primary objective is to boost private sector investment across the whole of the UK and create the right conditions for all businesses to innovate, by giving them the confidence to do so. That is why Government have created a comprehensive and long-standing programme of support, which includes the Advanced Propulsion Centre, the automotive transformation fund and the Faraday battery challenge—all tangible interventions that industry can access. We believe that, through those programmes, we can de-risk private investment in R&D, fast-track the commercialisation of new technologies and unlock the industrialisation of our EV supply chains.

Photo of John Redwood John Redwood Conservative, Wokingham

Would the Minister like to give us a few thoughts on what she thinks the opportunities are for synthetic fuels, sustainable fuels and hydrogen? How will they fit in around her battery vision?

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

My right hon. Friend’s views on electric vehicles and zero emissions are well documented. As I mentioned, a hydrogen strategy is also in place. I have been to a number of projects where vehicles are using hydrogen to ensure that that technology is exploited and that there is supply and demand in the chain, too. We are looking at sustainable alternative fuels not only in the automotive sector but in the aviation sector, so it is not just in that space. All alternative fuels will be investigated.

The future of the auto sector is electric—although I know that my right hon. Friend would like it to be much wider—automated and connected. The UK is well placed to consolidate its position among global R&D leaders as these technologies begin to commercialise, creating jobs and valuable new services for our businesses and communities. Our flagship Commercialising Connected and Autonomous Mobility programme will bring benefits across the UK. The Centre for Connected and Autonomous Vehicle’s recent £66 million Commercialising CAM programme 2025 aims to create an early commercial market that could be worth £42 billion by 2035. This innovation will save lives, create jobs, enable more efficient movement of people and goods, address chronic driver shortages, and better link under-served communities to vital services. As part of the programme, on 5 September, I was pleased to announce £18.5 million of public grants to 13 projects and 43 organisations across the UK to strengthen our capabilities in the CAM supply chain. I then had first-hand experience of a self-driving vehicle with Wayve, near King’s Cross. These technologies are here. They are no longer something from science fiction. Today, we can take automated bus journeys in Didcot and Edinburgh, with more world-class automated passenger and freight services to follow in the coming months.

In addition, through Government policies, we are enabling future mobility in the UK. We launched the full local electric vehicle infrastructure fund in March 2023. Following a pilot, it provides a further £381 million over the next two financial years to deliver tens of thousands of local charge points across England. Furthermore, to enable long-distance journeys, the rapid charging fund will future-proof electrical capacity at strategic locations to prepare the network for a fully electric car and van fleet—not just cars.

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

I hear my hon. Friend. With up-to-date policymaking, we ensure that consumers and taxpayers get the best possible option of modern auto transportation.

As recent investment decisions suggest, our message—I keep reiterating it as co-chair of our industry-Government forum, the Automotive Council—that the Government have the automotive sector’s back, was heard loud and clear. In that regard, we do not shy away from the challenges the industry has been facing: rising costs because of Putin’s horrific war in Ukraine; supply chains disrupted by covid aftershocks; and a fierce international competition for green manufacturing investment, rooted in an economic security concern, leading to countries choosing protectionist tools and consequently threatening the hugely important global supply chains that rely on cross-border collaboration. Those are all serious challenges for the UK automotive sector.

Those issues, however, are not unique to us. Countries across the globe face similar challenges and provide different responses. Some feel that the best way to reach pole position in the race to secure green manufacturing is to spend incredible, eye-watering amounts of their taxpayers’ money. We have taken a different approach and concentrate on the best way to encourage investment with targeted support. We have more than a chequebook to attract companies to these shores. Our highly productive and skilled workforce, focus on innovation and ease of doing business are key factors in a company’s decision to base itself in the UK. We do not need more evidence of that than the three recent announcements I mentioned earlier.

As co-chair of the Automotive Council, I consult regularly with representatives of auto companies and listen to their views on how the UK can raise its international competitiveness. Our competitive business environment and regulatory system evidently continues to stimulate investment in the UK, but that can only come from a fruitful exchange with industry and by addressing concerns raised. For example, in February, we announced the British Industry Supercharger, a range of targeted measures to ensure electricity prices for key energy-intensive industries, including battery manufacturing, are in line with major economies around the world. An issue raised by many colleagues on both sides of the House is skills. We understand automotive companies need highly skilled individuals across the entirety of their business. One reason the UK is attractive is our world-leading universities, with four UK institutions in the global top 10, according to the QS world university rankings. But that is not all. We support the auto sector through the apprenticeships levy, with £2.7 billion in funding by the 2024-25 financial year. That will support apprenticeships in non-levy employers, often small and medium-sized enterprises, where the Government will continue to pay 95% of apprentice training costs.

We also recognise the importance of a level playing field. That is why, at spring Budget, the Chancellor launched a new capital allowances offer. Businesses will now benefit from full expensing, which offers 100% first-year relief to companies on qualifying new main rate plant and machinery investments from April 2023 until March 2026; the 50% first-year allowance for expenditure by companies on new special rate, including long life assets until 31 March 2026; and the annual investment allowance, providing 100% first-year relief for plant and machinery investments up to £1 million.

One issue that has already been touched on is our relationship and tariffs with Europe. To support our industry through the transition, we must also address any and all barriers to trade with partners and markets all over the world. Our closest trading partner is the EU, with whom we share not only climate goals and a trajectory towards electrification, but deeply integrated supply chains. Over 50% of cars manufactured in the UK and exported are destined for EU consumers.

For those reasons, we are working closely with industry to address its concerns about planned changes to the rules of origin for electric vehicles in the trade and co-operation agreement between the UK and the EU. Since signing a deal, unforeseen and shared supply chain shocks have hit the auto industry hard. That has driven up the cost of raw materials and battery components, making it harder to meet the changing rules. That risks industry in the UK and the EU facing tariffs on electric vehicles at a crucial time in the transition to electrification. I and the Government are determined to seek a solution to that shared problem and to work with the EU to fix it for 2024.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

There are, of course, proposals by Chinese battery makers to consider investing in the UK. Can the Minister tell the House whether, if investments are made by those Chinese firms, the cars we make with those products will still be allowed to be exported tariff-free and will not get caught by new tariffs because of the amount of foreign content they might contain?

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

The right hon. Gentleman raises a valuable point. We need to ensure not only that we support UK manufacturers, but that new investors and entrants into the market are treated equitably. We know that, because of the negotiations taking place on rules of origin, there has been a consultation taking place in Europe on its anxiety about the market being flooded by cheaper EVs. Obviously, we need to allow customers to make a choice, but we have to ensure that UK manufacturers are not dealt a blow by any new Chinese entrants into the market. He knows my history when it comes to dealing with China and sanctioning. That is why I have been doing so much work not only to support our UK manufacturers, but to ensure our supply chain is resilient. I hope that will give him some confidence on this issue.

As I mentioned to Rachel Hopkins, this will impact EU manufacturers just as much as it impacts UK manufacturers; because they import more into our economy, it will be a heavier burden for them.

Photo of Rachel Hopkins Rachel Hopkins Shadow Minister (Defence)

I thank the Minister for giving way again. On that point, given the impact on both the UK and EU automotive sectors, can she enlighten us any further on whether there would be any suspension of the ratcheting up of percentages in the rules of origin and a delay to implementation through those negotiations?

Photo of Nusrat Ghani Nusrat Ghani Minister of State (Department for Business and Trade) (jointly with the Cabinet Office)

The hon. Member is asking me to comment on policy that is outside of my jurisdiction. It is led by the Foreign, Commonwealth and Development Office and the conversations will continue. The important thing to note is that we have to constantly and continually impress not on UK manufacturers, but on their sister representatives in Europe the impact it will have on European manufacturers as well. I think that, considering the issue will impact not only here but in mainland Europe, it will be resolved soon enough, while recognising that when dealing with the EU decisions tend to be taken very late in the day.

On supply chains and critical minerals, as I emphasised recently to the Business and Trade Committee, as part of our mission to secure a green and innovative future in UK automotive manufacturing, we need to ensure we develop key supply chains in Britain for battery manufacturing and electric vehicle production. I recognise that critical minerals are fundamental to producing batteries and anchoring the electric vehicle supply chain in the UK. We are accelerating our international collaboration, including recently signing partnerships with Canada, Australia, South Africa, Kazakhstan, Saudi Arabia, and Zambia, with more in the works, and engagement through the Minerals Security Partnership, the International Energy Agency and the G7.

We celebrated the announcement of the joint venture between British Lithium and Imerys—our UK-based lithium hub—on 29 June. By the end of the decade, it will supply enough lithium carbonate for 500,000 electric cars a year. We have also published “Critical Minerals Refresh: Delivering Resilience in a Changing Global Environment”, for which I was responsible. It highlights the progress to date and sets out our refreshed approach to delivering the strategy for UK businesses. As part of that approach, I have launched an independent task and finish group to investigate the critical mineral dependencies and vulnerabilities across UK industry sectors—including the automotive sector—and the opportunities for industry to promote resilience in its supply chains.

In plain numbers, the UK automotive industry employs 166,000 people, adds over £70 billion to the UK economy, and is our second largest exporter of goods. We are also home to more than 25 manufacturers—the role of the supply chains and small and medium-sized enterprises was mentioned earlier—which build more than 70 different vehicles in the UK, all of which are supported by 2,500 component providers and some of the world’s most skilled engineers. In 2022, we exported vehicles to more than 130 different countries and built more than three quarters of a million cars, with the onward trajectory rising year on year.

I am happy to add some more of those plain numbers: three, as in the three announcements I have made so far about recent investments in BMW, Stellantis and Tata; four, as in more than £4 billion of investment in a new gigafactory from the Tata Group; 40, as in 40 GWh, one of the largest gigafactories in Europe to be built in the UK—it is not about the number, but about the capacity; 4,000, as in up to 4,000 new jobs in addition to the existing 166,000; £600 million, as in the investment in its Oxford plant that BMW has just announced; and two, as in the two new fully electric Mini models being produced here in the UK. The Government are clearly not simply securing our world-class industry, but paving the way for the UK’s future in automotive manufacturing.