Car bodies being worked on by robots

The Future of the UK’s Sustainable Automotive Industry: Can it save us from a double-dip recession?

On the 18th of November 2020, Boris Johnson announced his Ten Point Plan to drive the UK’s ‘green industrial revolution’, an ambitious plan with reforms in many high-carbon industries such as electricity and transportation. With the predictions that unemployment could reach 2.6 million by mid 2021 along with the fears of a double-dip recession, we may ask whether such costly reforms are currently appropriate, given the uncertain future of certain industries in the pandemic. Indeed, the environmental Kuznets curve (Fig. 1) shows that environmental progress occurs after increases in personnel income since the population will likely not be receptive to or engage in any environmental changes before this. For example, anyone with a highly unstable source of income will not be receptive to buying an electric vehicle on account of their higher upfront cost. However, quite conversely, these initiatives could present opportunities to escape from this very ‘economic stagnation’ that has arisen from the collapse in business investment and unemployment by creating the multiplier effect. The automotive industry best exemplifies how green initiatives can lead to such economic recovery.

Figure 1: Theoretical graph of environmental degradation against per capita income. Graphics: Carl Scandelius

Boris’ plan intends to end the sale of all new internal combustion vehicles by 2030, accompanied by £1 billion of investment into the construction of ‘Gigafactories’ to manufacture the required batteries for electric vehicles (EVs), each of which is predicted to provide 2000 jobs  in the manufacturing and construction industries. Along with this, the plan pledges £1.3 billion for the establishment of charging infrastructure to supply the growing EV market in the UK and to encourage the transition to EVs by reducing their major inconvenience- a shorter range compared to internal combustion vehicles. This investment will propagate via the multiplier effect through the initial employment of the construction industry, the job opportunities provided in the new ‘Gigafactories’, and the maintenance of the infrastructure. This will certainly help combat the recent spike in unemployment (the ONS gives the figure of 1.72 million unemployed).

EVs may also be the UK’s opportunity to revitalise their automotive industry and flip the decade-long trade deficit, currently at 6 billion GBP. A trade surplus of EVs would increase employment in the UK in the automotive industry and position the UK as a global leader in EV manufacturing. Automotive trade has also been protected from post-Brexit tariffs on cars and their parts, which will encourage the revitalisation of the industry in the UK. The reason for the current trade deficit is due to the lead of other EU countries, especially Germany, in the manufacturing of conventional vehicles. However, this is not the case for EVs – in 2016 one fifth of all EVs sold in Europe were produced at the Nissan plant in Sunderland. Indeed, the domestic demand is certainly there and is set to rise rapidly, with a 184% rise in pure-electric car registrations in September 2020 compared to the previous year, with petrol and diesel cars down by 50.6% and 62.1% respectively. This change in demand is also reflected throughout the rest of Europe, and indeed the world, with the global total electric car sales increasing from 0.5 million in 2015 to 3.25 million in 2020.

The UK could catalyse growth in the EV industry by employing a ZEV (Zero Emissions Vehicle) credit system similar to the one in California or the NEV (New Energy Vehicle) mandate in China. These schemes encourage manufacturers to increase their EV production through a credit return for each sale (each manufacturer is require to generate a certain number of credits each year; a surplus can then be sold to other companies for profit, as Tesla has done) and thus this would allow the UK greatly to increase its domestic production to meet the rapidly rising global demand. One needs only look to China to observe the potential development of the EV industry in the UK, who, after the implementation of their NEV mandate, now produce over half of all EVs globally. This graph shows a prediction for UK EV sales under the influence of a ZEV mandate, putting the UK on a similar course as Norway.

Figure 2: A projection of the potential growth of EV industry with a ZEV mandate. Graphics: “UK market share of electric vehicles to 2030” by Green Alliance. See below for image credits.

Of course, there remains the environmental problem that the electricity powering these cars is generated unsustainably – in UK 2019, 43% of electricity was generated by fossil fuels. To this end, the Ten Point Plan also addresses an increase in sustainable energy sources, including wind and nuclear energy, with the intent to quadruple offshore wind energy to 40GW by 2030, which is predicted to attract up to £20 billion of private and foreign investment and double the number of jobs in the industry over the next decade (another 60,000). Not only does this hold the promising environmental benefits of saving 21 mega tonnes of CO2 equivalent between 2023 and 2032, but wind energy has also already proven to be attractive to investors, with £11.5 billion of investment between 2017 and 2021.  Hinkley Point C nuclear power station (wholly foreign-owned) exemplifies the prospective economic benefits of developing sustainable energy, with around 25,000 jobs created during construction alone. There has already been significant economic benefit to the South West economy, with almost £2 billion already spent in the local economy. This will be crucial for the recovery of the economy post-pandemic since FDI creates a multiplier effect. Local companies profit from this, thus increasing the disposable income of the local population and as a result increasing the demand for goods and services.

If the UK manages to capitalise on this increased global demand for EVs, predictions suggest as much as £95 billion could be contributed to the UK economy, whilst also taking strides towards the ‘green industrial revolution’. This chance for the UK to develop its EV industry presents an unmissable opportunity for the rapid recovery of the economy after the pandemic, along with establishing infrastructure and influence over an industry that is set to increase globally with the many resolutions to ban the sale of new petrol and diesel cars in countries including China, India, Germany, Norway, and France.

Image credits: https://www.green-alliance.org.uk/resources/How_the_UK_can_lead_the_electric_vehicle_revolution.pdf  is licensed under https://creativecommons.org/licenses/by/2.0/

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