Mark Young explores the state of play for Britain’s ultra low carbon vehicle (LCV) proposition and finds out why the ambitious plan to become a world leader in LCV might just come off.
Last year the New Automotive Innovation and Growth Team (NAIGT) — the faculty at the Department for Business, Innovation and Skills that has evolved into the independent Automotive Council — released this vision of the UK automotive industry: “A competitive, growing, and dynamic industry making a large and increasing contribution to employment and prosperity in the UK, and playing a decisive global role in developing and manufacturing exciting, low carbon vehicle transportation solutions…” That ideal was brought closer to reality in late March, when global car giants Ford and Nissan announced within hours of each other that they had selected the UK as the base for developing new low carbon operations. Between them they will invest nearly £2bn in the UK to make it happen, with Ford’s £1.5bn backed partly by government loan guarantees and a European Investment Bank loan.
Having last year decided that its Sunderland plant will produce 60,000 24KW batteries to power electric cars for both itself and Renault, Nissan has now announced that Sunderland will make some of the electric cars as well. Production of the 100-mile range, 90mph top speed LEAF model for European markets will begin in 2013 and 50,000 are expected to leave the Tyne & Wear factory’s lines per year. Nissan will invest £420m in the UK to set Sunderland up for the new model and will get just over £20m in a golden hello from government.
The ambiguous phrase “safeguard or create jobs” seems to be a staple clause in any investment announcement these days. It was wheeled out here too – but it is very good news for the local economy that 550 jobs were quoted.
Ford, meanwhile, will invest £1.5bn to create a new generation of environmentally-friendly engines, with the Government providing £380m in loan guarantees through its Automotive Assistance Programme (AAP) as part of the package. The investment will be spread across six projects at Ford’s Dagenham, Southampton and Bridgend plants as well as its research and development centre at Dunton, Essex. Two and a half thousand jobs have been safeguarded.
These investments demand recognition as an interim victory in the efforts to make the UK a leader in the low carbon vehicle sector. It is that much harder than for her continental competitors in that the UK has no real domestically-owned, volume car makers. So without announcements of this kind, a presence in this sector we have so highly prioritised is far from guaranteed. Business Secretary Lord Mandelson intonated as much at Ford’s Diesel Engine Centre in Dagenham on the day of the announcement. When asked how government can afford this spending when the pressure is on to reinin the public purse, he said: “We cannot afford not to make this, and these, investments. The biggest antidote to a deficit is growth and these jobs would be lost overseas if we are not at the forefront of the LCV technologies.”
Is the grass greener on this side?
There is actually a case to be made that avoiding overt national brand iconography – think of France and Peugeot Citroën and Renault leap to mind, the same with Germany and Volkswagen, BMW, Audi and the like – actually constitutes a help rather than a hindrance in terms of the race for ultra low carbon leadership. Nikki Rooke, spokesperson for the Society of Motor Manufacturers and Traders (SMMT), says that that although our largest continental cousins have made clear in Brussels that they are committed to developing ultra low carbon technology, the fact that they will be looking to protect their native producers severely inhibits their ability to attract investment from outside of Europe.
“[Other countries] have a national company which they’re looking to support; effectively the proposition for the UK is much larger,” says Rooke.
“We’re not looking just to sustain one or two companies, we’re looking to encourage a much broader range. For the vehicle manufacturers that are already producing here, the threat isn’t from other car factories in the UK. It’s from similar Nissan, Ford, Vauxhall and Toyota plants in Europe where the parent companies could make their investments. That creates an opportunity – the fact that we’ve got a government that is supportive of UK investment rather than a government that is more inclined to focus its efforts on protecting its national interests is a very powerful signal for us to send to multinational companies looking for somewhere to invest.” Though government has been criticised for being slow to disseminate cash through the Automotive Assistance Programme during a period when firms throughout the automotive supply chain were struggling to survive, Rooke’s view is that “a fundamental shift” to a proactive strategy rather than a reactive one proves Whitehall is now committed to automotive’s cause – especially since it has seemingly begun to align its money and its mouth.
“Previously they may have only stepped in on a case by case basis if there was a certain company or a certain plant in danger but the idea now is to work long term with the automotive industry to position it for the next wave of growth,” she says.
Walking the walk
Lord Mandelson’s position as co-chair of the Automotive Council, alongside the greatly respected former Ford executive Richard Parry Jones, certainly suggests relationships are tightening. The SMMT is effectively working as the Automotive Council’s back up team and has formed two factions to help with the ultra low carbon proposition; one for technology and one for supply chain. On the technology side, a road map has been drawn up which focuses on encouraging companies to develop demonstrator programmes to inspire both consumer and manufacturer empathy. The supply chain group meanwhile, is looking to build a commodities road map to highlight which components vehicle manufacturers will be looking to supply from the UK and identify the companies with the potential to provide them. SMMT has fed into this initiative with a survey conducted in the last quarter of 2009 among chairman, chief executives purchasing directors of vehicle manufacturers and major tier one suppliers producing in the UK. The survey found that for these companies sourcing from the UK is an increasingly attractive proposition owing to exchange rates, logistics efficiency and the need to cut road miles in line with corporate social responsibility drives. The challenge now is to ensure the supply chain does not miss the trick. Rooke says the supply chain group’s immediate focus is communicating the plethora of funding opportunities available from government directly and through support agencies including the Technology Strategy Board (TSB), Carbon Trust and Energy Technologies Institute (which together have formed the Low Carbon Innovation Group).
The advantages of equipping the supply chain will reap reward – “a healthy supply base with ultra low carbon capabilities will attract more foreign investment in R&D and potentially more production,” says Rooke. “Companies are much more likely to base new models here if there’s a supporting supply chain nearby.”
Examples of funding opportunities and recent awards include a £19m competition for collaborative supply chain development projects through the TSB; £20m for replacing public fleet vans with electric models; and £7.2m of capital funding for a Fuel Cells and Hydrogen Demonstration programme. A number of other ultra low carbon initiatives were outlined in Chancellor Alistair Darling’s budget address at the end of March. These included an intelligent transport technology test centre in Nuneaton and support for SMEs through the UK Finance for Growth scheme which encourages lending for low carbon vehicle technology and infrastructure development. Darling also introduced a lower 5% company car tax rate for vehicles emitting between 1 and 75g/km CO2 and a 100% first-year capital allowance for zero-carbon goods vehicles.
Last year £25m was put up for a consortia of car manufacturers, power companies, Regional Development Agencies, councils and academic institutions. They were tasked to deliver 250 low carbon vehicles to across eight locations in the UK, acting as a demonstrator programme to kick start consumer demand. The Technology Strategy Board says applications have all now been finalised and details of the successful projects will be published shortly.
To further help create a viable market place, Whitehall will foot a discount of 25% (up to a maximum of £5,000) on the cost of new ultra low carbon cars. The scheme begins in January next year and a £230m pot has been put aside. In addition a further £8.2m, matched by local sources, is being put up for the introduction of charging points in London, the North East and Milton Keynes. This initiative is a pilot scheme in creating the necessary infrastructure to support widespread use of electric cars. In London there will be 6,000 Plugged in Places installed at workplaces, 500 in streets, and 350 in public car parks. Overall 11,000 of the charge points will be installed in the three areas over the next three years.
There is still a long way to go and further successes will undoubtedly need to be weighed against further setbacks before we are close to knowing whether the battle will be won. However, in this decade that will shape the future of the automotive industry forever, it is encouraging to see that concrete plans are in place and that actions are increasingly replacing words in an effort to ensure that the UK’s future now looks a distinctly brighter shade of green than it did this time last year.