UK in talks with six companies over battery ‘gigafactories’ for electric cars

Six companies are in talks with the UK about building so-called gigafactories for production of batteries for electric cars in moves that could secure the future of Britain’s automobile industry.

Carmakers Ford and Nissan, conglomerates LG and Samsung, and start-ups Britishvolt and InoBat Auto are in discussions with the UK government or local authorities about locations for potential factories and financial support, according to people briefed on the talks.

While Britishvolt has gone public with its project, the other companies’ discussions with the government or councils about gigafactories have so far been private. The plans by Nissan, the largest carmaker in the UK, were revealed by the Financial Times last month.

The British government has put securing car battery investment at the heart of efforts to sustain the country’s auto industry, as ministers pursue ambitious plans to cut carbon emissions.

The government’s plan to ban the sale of new petrol and diesel cars by 2030 and hybrids by 2035 will require the UK’s vehicle plants to shift to producing electric models.

“We need gigafactories to sustain UK car manufacturing for the long term,” said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, a trade body.

A UK business department spokesperson said the government was “dedicated to securing gigafactories, and continue to work closely with investors and vehicle manufacturers to progress plans to mass produce batteries in the UK”.

British research institutions, such as the Battery Innovation Center and the Faraday Institution, are seen as key levers to attract investment in battery manufacturing.

But the UK risks being outgunned by the EU, which has prepared a large incentive package to woo battery makers.

While the UK government has a £500m fund to help finance battery plants, the EU has assembled a €2.9bn war chest, with countries such as France and Germany offering additional money to augment their attractiveness.

So far, there are 38 planned gigafactories across Europe, according to green lobby group Transport & Environment. Only one has been disclosed in the UK: Britishvolt’s project.

“There’s a de facto competition between the UK and Europe, and whoever wins the gigafactories wins the auto business,” said Andy Palmer, vice chair of InoBat.

The UK auto industry has recorded plant closures in recent times and been buffeted by Brexit, but it still produced 1.3m cars a year before the coronavirus pandemic hit.

The sector’s push towards electrification means the remaining UK plants must secure locally made batteries or risk losing out on manufacturing new models.

Petrol and diesel engines made in one location are often then shipped across the world before being fitted into cars on assembly lines, but the heavy weight of batteries means they need to be produced close to vehicle plants in order to minimise transport costs.

While the talks between companies interested in making batteries and the UK government raise hopes it can secure investments, none of the discussions have been finalised.

One of the most surprising interventions has been by Ford, which has not made cars in the UK for almost 20 years but has a plant manufacturing engines for vans at Dagenham.

In talks with the British government, which are at an early stage, Ford has indicated it is exploring making batteries in the UK that would then be shipped to Turkey for use in a planned electric version of its Transit van, said people familiar with the discussions.

This proposal echoes current Ford practice where its engines made in Dagenham go into diesel Transit vans assembled by the company in Turkey.

Ford may make parts of battery modules in Britain — including cells — before shipping them to Turkey for final work and installation.

A Ford spokesperson said it would “confirm the battery supplier for the Transit . . . closer to its launch”, due in 2023.

Last month, Ford announced plans to form a battery joint venture with SKI, a Korean manufacturer.

A location has yet to be identified by Ford for where batteries would be made in the UK, although it is unlikely to be at one of the company’s existing British sites.

When identifying potential gigafactory locations, power — particularly renewable energy — is a major consideration because the process of making batteries is very energy intensive.

This issue may mean that north-east England, which has good access to the electricity grid, has a better chance of securing plants than the Midlands, the traditional centre of the UK auto industry.

Nissan’s negotiations with the government about building a battery plant at its Sunderland manufacturing complex hinge on energy costs, said people briefed on the talks. The company wants to cut its energy costs to increase the competitiveness of the site.

In the Midlands, local authorities have put together a plan to turn the old Coventry airport into a battery plant.

Having submitted a planning application, the councils now want to bid for part of the government’s £500m fund to try to secure a battery maker.

InoBat is in talks with the local authorities in the Midlands to locate a facility on the disused Coventry airport, said two people briefed on the negotiations.

The company wants to focus on producing a limited number of batteries for high performance vehicles.

Andy Street, the former John Lewis boss who is now mayor of the West Midlands, said he “will not rest until the West Midlands has the gigafactory it needs”.

Britishvolt rejected the old Coventry airport because of insufficient power, said people with knowledge of the decision.

Its proposed manufacturing site in Blyth in Northumberland is next to a power interconnector bringing renewable energy from Norway.

But Britishvolt faces questions about its plans: unlike LG and Samsung, the start up does not have proven in-house battery technology.

People close to Britishvolt said it was in talks with more than 10 potential customers.

LG and Samsung, two of the largest global players in battery manufacturing that have plants across Europe, are both in early stage talks with the UK government about investments, said people familiar with the matter.

However, LG and Samsung are only likely to proceed if they have deals with major carmakers. The groups did not immediately respond to requests for comment.

With Nissan tied into an exclusive contract with its Chinese battery partner Envision, the largest available UK customers for battery makers are Jaguar Land Rover and BMW’s Mini.

JLR, which unveiled plans this year to phase out petrol and diesel engines by 2035, will probably be the key to Britain securing investments by battery makers.

JLR chief executive Thierry Bolloré told a Financial Times’ conference last month that “the goal is to have the full value chain as close as possible in the UK”, but did not elaborate further on British sourcing plans for batteries.

BMW’s Mini plant in Oxford currently makes one electric model using batteries imported from Germany, but may ultimately expand production.

“When and if you bring more electric production to Oxford is not decided yet,” said Mini boss Bernd Körber.

Stellantis, which owns the Vauxhall plant at Ellesmere Port, is also in talks with the government to make an electric car at the site but has yet to engage in battery sourcing discussions, said one person briefed on the situation.

* This article has been amended since original publication to clarify Britishvolt’s proposed manufacturing site would be next to an interconnector bringing renewable energy from Norway, and not Iceland, as previously stated.

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