Market Insights

UK EV Battery Production Falls Short

June 09, 2023 by Shannon Cuthrell

The United Kingdom is racing to secure its domestic battery production capacity to compete in the global electric vehicle market. But new trade policies could threaten that expansion. 

The United Kingdom plans to start phasing out conventional internal combustion engines next year, requiring 22% of new car sales and 10% of van sales to be zero-emission vehicles. By 2030, that expectation will rise to 80% and 70%, respectively, before reaching 100% in 2035. However, the country will need a substantial increase in electric vehicle battery capacity if it wants to meet this target without outsourcing production abroad. 


West Midlands Gigafactory

The upcoming West Midlands Gigafactory, slated to begin production in 2025, represents one of only a handful of large-scale battery manufacturing projects in the U.K. Image used courtesy of Coventry Airport


The U.K.’s automotive production peaked in the 1970s at nearly 2 million cars annually. However, years of trade uncertainties and fallout from Brexit have plummeted that capacity to a new low last year. According to the Society of Motor Manufacturers and Traders (SMMT), around 775,000 cars were built in the U.K. in 2022—of which 78% were exported, mainly to the EU (with a 57.6% market share) and the U.S. (13.3%), followed by China. 

Britain falls behind its economic counterparts on trade in the automotive sector, as post-Brexit “rules of origin” regulations are set to add tariffs on U.K. vehicles with batteries produced in Asia. In 2024, 45% of the value of an EV must be sourced domestically or in the European Union to be sold without tariffs. That threshold will rise to 65% in 2027. 

Rules of origin recently attracted backlash from major EV makers such as United States-based Ford, which is investing hundreds of millions to expand its U.K. production capacity. Ford Britain Chair Tim Slatter warned that introducing EV tariffs will undermine the country’s zero-emission vehicle mandate and slow development. The company urged officials to continue the current trade status quo until 2027, buying the supply chain time to develop in Europe to meet demand.

Dutch auto giant Stellantis also recently warned it could rack up 10% tariffs on its EU-destined exports, making it unable to meet rules of origin amid the ongoing increase in raw material and energy costs. Like Ford, the company urged negotiators to make a deal to continue current trade policies ahead of 2027. 


More Gigafactories Needed

Despite EV adoption rising worldwide, sales figures show that diesel and petrol vehicles remain king in Britain. Of 1.6 million car registrations last year, battery EVs (BEVs), plug-in hybrid EVs (PHEVs), and hybrid EVs (HEVs) claimed a 34.5% market share, according to SMMT data. Mild hybrid cars—combining an electric motor and a combustion engine running on diesel or petrol—accounted for 18%. As new zero-emission mandates kick in, these shares are expected to grow in the coming years.

Still, the U.K. lacks the manufacturing base to meet domestic and global demand. It’s home to just a few high-volume automotive factories churning out vehicles from Nissan, Stellantis, Jaguar Land Rover, and BMW brands. That includes the U.K.’s only gigafactory: a China-owned facility supplying 1.9 gigawatt-hours (GWh) of Nissan Leaf production in Sunderland. Nissan supplier Envision AESC plans to invest over $1.2 billion to boost the site’s capacity to 12 GWh, with a second factory expected to become operational in 2025, adding enough production for 100,000 units annually. 


A rendering of the planned 30 GWh Britishvolt gigafactory

A rendering of the planned 30 GWh Britishvolt gigafactory. Image used courtesy of Britishvolt

The U.K. battery landscape has also been clouded by the recent fallout surrounding lithium-ion battery producer Britishvolt, which planned to build a $4.7 billion, 38 GWh gigafactory in Northumberland by 2025 but was set back by funding issues and failed construction milestones. Australian startup Recharge Industries offered a lifeboat to pull the company out of insolvency earlier this year, buying it for $10.5 million. However, part of that deal entails a pivot to selling battery cells for energy storage applications, with production starting by late-2025. 

Per SMMT figures, the U.K.’s current production capacity at battery gigafactories is just 2 GWh, which equates to 33,000 EVs per year. More gigafactories will be needed to reach 60 GWh by 2030, enough for 1 million EVs annually. However, $13.4 billion in battery production commitments since 2011 are set to come online in the coming years, raising Britain’s capacity to 41 GWh by 2027. 


A map (from page 6) of U.K. investments in EV production, research, and battery development since 2011

A map (from page 6) of U.K. investments in EV production, research, and battery development since 2011. Image used courtesy of the Society of Motor Manufacturers and Traders

The Faraday Institution reports that the U.K. will need to act fast to secure more investments in new gigafactories by 2030, when 100 GWh of supply will be required to keep up with the demand for batteries in EVs and grid storage applications—the equivalent of five gigafactories each running on 20 GWh of annual capacity. By 2040, the demand will increase to nearly 200 GWh, requiring ten gigafactories. 

Overall, these supply gaps threaten Britain’s competitive edge over other regions. Europe has around two dozen gigafactories in various stages of development. A market analysis from Fraunhofer ISI projects European battery capacity to reach 1.5 terawatt-hours (TWh) by 2030, up from an estimated 500 GWh by 2025. Meanwhile, the U.S. Department of Energy expects new EV battery plants to boost North America’s manufacturing capacity from 55 GWh per year in 2021 to nearly 1 TW by 2030, enough for up to 13 million EVs annually. 


Recent Developments

Investments are ramping up, albeit slower than in Europe and the U.S. The $3.1 billion West Midlands Gigafactory is set to open in 2025 with 60 GWh of capacity—enough for 600,000 EVs annually. Also, Stellantis has invested $124.5 million to transform its Vauxhall Ellesmere Port assembly plant to manufacture electric vans, with sheet metal parts and other components supplied by partners based in Spain. 

Jaguar Land Rover (JLR) announced in April that it would invest $18.6 billion over five years to build out its U.K. footprint, including expanding its Merseyside-based plant into an all-electric manufacturing facility. Its Wolverhampton internal combustion engine manufacturing facility will also begin producing electric drive units and battery packs for its future EVs. Meanwhile, JLR’s parent company, Tata Motors, is reportedly finalizing a deal to build a large-scale battery plant in Somerset, according to the BBC

Over the last few years, Ford has invested $473.2 million to transform its Halewood manufacturing plant into an EV component hub, increasing annual production from 250,000 to 420,000 units. The plant will now account for 70% of the 600,000 EVs Ford plans to sell in Europe annually by 2026. However, as mentioned above, the company’s U.K. executives recently warned that Britain’s new rules of origin policies could throw a wrench in those plans.