The FDI angle:

• India's Tata will invest £4bn in a gigafatory in Somerset, UK.
• The project is a shot in the arm for the ailing British car industry.
• Since the Brexit referendum, car production in the country has halved.
• Tata's project can catalyse a wider development along the domestic value chain.
• However, the UK’s EV strategy has shortfalls.
• “There is no forward-thinking long-term strategy for UK industry,” says Green Lithium’s co-founder Richard Taylor.

The sprawling site of a former munitions factory in Somerset, a rural corner of south-west England, will soon be home to one of Britain’s most important industrial facilities. Tata Group, which owns Jaguar Land Rover (JLR), confirmed on July 19 that it plans to build a new 40-gigawatt ‘gigafactory’ for the manufacturing of electric vehicle (EV) batteries.

The £4bn project comes as a much-needed boost for Britain’s car industry. Data from the Society of Motor Manufacturers and Traders shows that UK car production has already halved since the Brexit referendum in 2016. 

UK carmaking will struggle to survive in the EV era unless gigafactories are built, given that the high costs of transporting heavy batteries make it cheaper to produce EVs and batteries in nearby locations.

According to the Faraday Institution, a research and development body, Britain will need five gigafactories by 2030, along with another five by 2040. At present, only one small facility is operating, while another is under construction — both are owned by Japanese company Envision AESC.

But will new gigafactories also result in a flourishing UK-based supply chain? The answer is far from straightforward: if the battle to bring gigafactories to Britain is hard-won, the struggle to grow a domestic battery supply chain is set to be harder still.

Reshoring push

An EV battery is a complex product. Most battery chemistries use lithium, cobalt and nickel in the cathode, and graphite in the anode. These materials are found in geographically diverse deposits, meaning no single country — and certainly not a small island — can be entirely self-sufficient in EV battery production.

But growing concern over China’s dominance of the processing stages of battery materials is persuading policymakers across the West to push for a ‘reshoring’ of mineral processing. 

Across Europe, there is a “drive to regionalise” battery supply chains, says Julian Hetherington, automotive transformation director at the Advanced Propulsion Centre, an agency supporting companies in scaling low-carbon technologies. 

Mr Hetherington says requirements in the UK’s post-Brexit trade deal with the EU will have “a significant bearing on localisation”. The deal imposes rules of origin requirements that will start to enter into force next year. UK-based EV manufacturers must source a growing share of battery inputs from within the UK or EU, or lose their tariff-free access to the EU market.

While carmakers have been raising concerns over their ability to comply with the regulations, the rules of origin requirements provide an incentive for companies to build processing facilities for battery materials in Europe. The UK is in competition with the EU to emerge as a hub for such facilities.

In this light, Tata’s new gigafactory in Somerset, which is expected to create 4000 jobs, is a great win for the country. 

It also comes at a particularly sensitive time as several start-ups that had been expected to play a major role in the UK’s EV industry have floundered in recent months. Most notably, Britishvolt, an aspiring battery manufacturer that secured a gigafactory site near Blyth in Northumberland, declared bankruptcy in January. 

“Our multi-billion-pound investment will bring state-of-the-art technology to the country, helping to power the automotive sector’s transition to electric mobility, anchored by our own business, JLR,” Natarajan Chandrasekaran, the chairman of Tata Sons, said in a statement on July 19. 

Our multi-billion-pound investment will bring state-of-the-art technology to the country, helping to power the automotive sector’s transition to electric mobility

Natarajan Chandrasekaran, chairman, Tata Sons

Looking for lithium

The British government now hopes that the Tata’s project will trigger development and create new jobs along the whole value chain. 

So far, efforts to establish British companies at the many stages of the battery supply chain have enjoyed mixed success — though there are some signs that the EV race is helping to revive dormant industries in parts of the country.

One of the battery minerals that Britain possesses is lithium. Cornwall-based start-up British Lithium announced a joint venture with French company Imerys in June to develop a lithium extraction project that it says could meet around two-thirds of UK battery demand by 2030. 

Andrew Smith, British Lithium’s CEO, says the company has benefitted from the fact that mining “is in the DNA” of Cornwall, where tin was mined from prehistoric times until 1998. Local people, he says, “understand mining and they understand that it’s high value creation for very little land use”.

Smith is optimistic that “the pieces are falling into place” for a UK battery supply. One of these pieces is found on Teesside — historically a centre for the chemicals industry — where the start-up Green Lithium is aiming to build a lithium refinery that could supply around 6% of Europe’s demand.

But Green Lithium will not be refining Cornish lithium; at least initially, the raw material will be imported from Australia. And its refined product will need to be exported to a cathode active material (CAM) plant for the next stage of processing.

CAM plants combine refined materials into the battery cathode. In practice, a gigafactory will need to source CAM from a plant in the UK or EU to meet rules of origin requirements.

“We really need to attract a CAM producer to the UK,” says Jeff Townsend, founder of the Critical Minerals Association, a lobby group that calls for greater self-sufficiency in industrial supply chains. “That’s got to be goal number one.”

Further reading on the transition to electric mobility: 

• The UK’s post-Brexit dream of independence
• Lithium mining in the UK: is it for real?
• The great resource disconnect puts EV targets at risk
• Canada’s EV ambitions wake up to flagging mining investment

Government support needed

Government support is a major feature of the ongoing race to localise EV supply chains. 

The UK faces an uphill battle to compete with the subsidies and incentives offered to battery supply chain companies by the likes of the US, Canada and the EU. 

“No politician will want to see the end of the UK car industry,” says Richard Hebditch, UK director at the non-government organisation Transport & Environment. “But that doesn’t necessarily translate into the level of action that's needed.”

The JLR facility in Somerset will benefit from government financial support, though ministers are yet to confirm the scale of the subsidy it offered for the project — the Guardian reported a government source as putting the overall subsidy support at £500m. 

But whether the government is providing sufficient strategic backing to the broader supply chains is open to debate.

“We do feel we are supported by the UK government,” says Green Lithium’s co-founder Richard Taylor, noting his company has benefitted from government grants. However, he adds that the government has “got a bit more to do” to provide investors with confidence to invest in the battery supply chain.

“The UK government, at the moment, seems quite slow to act on these things, quite unsure about making decisions — and it is obviously making UK business suffer,” Mr Taylor continues. “There is no forward-thinking long-term strategy for UK industry.” 

Many other business leaders echo this point; fDi Intelligence reported in May how experts had told a parliamentary committee that a lack of coordinated policies and subsidies risked causing the slow decline of UK car manufacturing.

If JLR proceeds with its Somerset gigafactory, a derelict site will be brought back to life and thousands of jobs will be created. But if this gigafactory, along with others in the UK, ends up importing their most important components from elsewhere in Europe, it will look more like a Pyrrhic victory and Britain will miss a huge opportunity to bring green manufacturing jobs.