Chapter 1
Support for battery manufacture and supply ecosystem key to progress
Government and industry must work together to accelerate the development of the UK’s EV industry.
When the EV index results are broken down into the individual categories, the UK is in the top three in terms of demand, as measured by factors including consumer awareness and knowledge, current EV penetration rates, fleet demand, and total cost of ownership. EY’s Mobility Consumer Index shows that 41% of surveyed UK consumers intend to buy an EV as their next car. During 2020, UK EV sales grew 1.4 times, despite a 29% decline in light-vehicle sales.
The UK’s position in the rankings has also been boosted by a supportive regulatory environment that has already been used to stimulate EV demand and, increasingly, supply. The UK is a part of the leader band of three countries under the regulatory pillar of the index, ahead of second-placed overall market leader Sweden. The UK Government has used a mixture of sticks and carrots to reach this position. Its Ten Point Plan for a Green Industrial Revolution, for example, suggests using £12bn of government funds in sectors such as zero-carbon vehicles to unlock private investment and boost green jobs. In other areas, stringent emissions regulations and a firm commitment to phase out combustion engines have been balanced by support for local battery manufacturing, development of charging infrastructure and consumer incentives, such as charger grants and parking perks.
In a bid to provide further detail around its decarbonisation plans, the UK Government unveiled its Transport decarbonisation plan in July 2021. Transport Secretary Grant Shapps described it as “just the start”, calling for “continued efforts and collaboration” to deliver the Government’s commitments in this area. So, how can government and industry work together to accelerate the development of the UK’s EV industry?
Consumer purchasing behaviour towards EVs
41%of UK consumers intend to buy an EV as their next car.
De-risking UK supply infrastructure
The UK certainly has the potential to develop a world-leading EV market, but if it is to improve its position in the rankings of the world’s top EV markets, the supply ecosystem needs further support. Of the three areas measured by the EY Global EV Country Readiness Index, this is the key element holding the UK back when it comes to advancing the domestic market.
The index measures five main elements in relation to supply: the domestic presence and future plans of OEMs; energy ecosystem maturity, which includes renewable energy penetration, availability of smart charging and vehicle to grid (V2G) options, and the electricity demand-supply gap; charging infrastructure; EV battery supply; and the prevalence of new battery and EV business models, such as leasing, subscription, battery swapping and finance options.
For the UK to progress further in the rankings, certain areas will require government support, as well as public and private investment. Optimising the fragmented nature of the UK’s charging infrastructure should be a top priority, as should developing a UK manufacturing base for EV batteries. Such issues are already being addressed in other markets; for example, the German Government announced plans in July to fund a €90mn (£77.2m) public charging infrastructure modernisation programme.
What action can the Government take to thrive in the future?
While the UK is fairly competitive among peers in terms of EV demand, it is pegged comparatively low on consumer perception parameters, such as behaviour towards charging infrastructure availability and intention to purchase an EV as a next vehicle. About 54% of the surveyed consumers in the UK consider a lack of charging infrastructure as a deterrent to purchasing an EV, compared with less than 36% in Sweden, 40% in China, and 52% in Germany and the US, according to the EY Mobility Consumer Index.
Indeed, the UK’s EV charger to parc ratio – which measures the number of chargers available versus the stock of EV vehicles in use – is 0.08, slightly below the global average of 0.1. Charging capacity will need to increase to encourage motorists to purchase EVs in the short term, but also to underpin any future increase in EV use in the UK. There is also a need to balance out public, private and workplace charger availability. At-home chargers currently account for 90% of the UK total, according to the International Council on Clean Transportation. Building up workplace and public charging options should be a key element of any effort to develop demand by facilitating ease of EV use among consumers.
Consumer attitude towards being deterred to purchasing an EV
54%of the surveyed consumers in the UK consider a lack of charging infrastructure as a deterrent to purchasing an EV.
In addition to strengthening and expanding the UK’s existing charging infrastructure, localising battery manufacturing could help boost the EV market. The battery is set to emerge as the biggest value pool in the transition to e-mobility, the development of deep and local manufacturing capabilities will be essential for the leading countries in this market
Support for localised battery manufacturing facilities will help keep costs down for consumers and sidestep logistical issues, as well as tariffs under the Trade & Cooperation Agreement (T&CA), that could arise from the need to import components from other countries. There is also scope for the Government to use the development of UK battery manufacturing capacity as a way to replace or transfer the highly skilled jobs that are being lost as the UK shifts away from internal combustion engine (ICE) manufacturing.
What action can corporates take?
In 2020, UK battery manufacturing capacity was around two gigawatt hours – just 4% of European capacity. However, plans are in development to boost this capacity. The UK Government and local authorities are reported to be speaking to at least six companies about building EV battery production facilities, including established automakers and start-ups.
The recent focus on localised battery manufacturing is likely to create new skilled jobs, not only in the battery manufacturing industry, but also across the supply chain. With battery manufacturers planning to co-locate supply chain partners and low-carbon energy production to strengthen the supply ecosystem, more regions of the UK are expected to become a core part of the EV-focused ecosystem. This ties in well with the Government’s ‘levelling up’ agenda to improve opportunities throughout England and Wales.
Aiming to support electrification of the automotive industry ahead of the 2030 ICE transition deadline, the UK Government is funding various lithium-ion battery manufacturing projects through different channels, such as the Advanced Propulsion Centre. However, the Government’s current £1bn fund for financing gigafactories is dwarfed by the €2.9bn (£2.5bn) on offer from the EU. The latter already has 38 planned gigafactories compared with two UK projects announced to date. If it is to compete with nearby countries and regions to gain market share, the UK Government will need to expand its support of such initiatives.
Chapter 2
A joined-up approach to developing the UK EV value chain
Strategically effective cross-sector partnerships can help deliver additional growth and manage risk.
Public and private sector coordination and integrated planning will be necessary to boost the UK into the ‘leader’ band of the EY EV Country Readiness Index. However, the Government has a clear role to play in signalling commitment and direction to give the necessary confidence to the private sector.
Consumer demand for EVs is strong in the UK and the Government has been an important driver of that to date. The UK has also started to make inroads into the development of a local market for battery R&D, as well as battery and EV manufacturing. But there is scope for the UK to do so much more.
In addition to creating demand, the UK has the capabilities to become a leader throughout the EV value chain. Continued support for innovative R&D around battery technology is one element of this pathway. This will require funding for facilities and for the development of a highly skilled and adaptable workforce. There are also opportunities for the UK further out along the value chain – for example, in the extraction of raw materials and the production of chemicals for EV battery manufacturing.
The need to foster and support the EV ecosystem across these sectors is clear if the UK is to become a global leader in this industry. For policymakers, this means continuing to provide consistent, joined-up structures, targets and roadmaps. For corporates, finding the most attractive value pools and business models to maximise return on investment will be key. Strategically effective cross-sector partnerships will help to deliver additional growth, while managing risk. Technology will also play a key role in driving digital transformation, implementing operational efficiencies and improving profitability in this sector.
With the right industry partners, corporates and policymakers can play a significant role in de-risking the EV investment outlook and ensuring that the UK becomes one of the global leaders of the EV transition.
Summary
Having ranked fourth in the first EY EV Country Readiness Index, the UK must achieve public and private sector coordination, and integrated planning, to become a global leader of the EV transition. While consumer demand for EVs is strong, continued support for the development of battery technology – and greater investment in the nation’s fragmented charging infrastructure – are key to the UK’s progress. With the right industry partners, corporates and policymakers, the UK can hope to de-risk EV investment and rise up the index rankings. For more information on the findings of the EY EV Country Readiness Index, please contact the team below.
