Ford layoffs hit UK car industry grappling with electric vehicles and Brexit

Ford layoffs hit UK car industry grappling with electric vehicles and Brexit

Nissan Leaf battery at the factory in Sunderland, UK.

A Nissan Leaf battery seen at the Envision factory in Sunderland, UK.
Photo: Phil Noble (Reuters)

When the American automaker Ford on February 14 announcement 1,300 job cuts in the UK was just the latest blow to an industry struggling to maintain production levels in a pandemic-hit post-Brexit economy that is on the on the brink of recession.

Globally, the auto industry is beginning a sea change in the way it operates, creating battery building capacity and the expertise to make electric cars instead of gasoline-powered ones. But the UK’s recent record for pulling cars off the production line, as well as some high-profile failures, suggest it may struggle more than most.

The golden age of car manufacturing in the UK is a thing of the past. Production peaked in 1972 with nearly two million cars made that year, according the Society of Motor Manufacturers and Traders (SMMT), and the country’s production has fluctuated ever since. A steady increase in the early 2010s was summarily reversed in 2016, the same year the UK voted to leave the EU: the UK made over 1.5 million cars in 2016, but this number had halved to 775,000 by 2022.

Why is electrification difficult for the UK?

One area where the UK has long excelled is R&D, with some of the best research institutions in the world and a long history of top-level engineering. Building large-scale batteries shouldn’t be an insurmountable challenge. And, if that turns out to be too expensive, importing them might be an option.

Yet the UK’s attempts to build a battery industry are faltering. In January 2023, the lithium-ion battery startup Britishvolt, which was building a massive gigafactory in Northumberland, collapsed into bankruptcy, leaving £120 million ($146 million) in debt.

“Britishvolt collapsed because, much the same as any new technology, converting a promising idea for EV batteries into profits requires extremely hefty costs to be paid up-front,” Rebecca Parry, a professor at Nottingham Law School, said Energy Live News. The company had to face strong foreign competition and, it seems, exorbitant internal costs. “It was actually a startup and despite the investments, it hadn’t developed a working prototype by the end of 2022 and it was still building its factory,” Parry said.

Why not import batteries?

Japanese carmaker Nissan has become the UK’s largest carmaker in 2022, producing 16.5% of all UK vehicles, a change that has happened in part because other major manufacturers have pulled out entirely. Honda closed its operations in Swindon in July 2021, resulting in the loss of more than 3,000 jobs. Vauxhall ceased to produce Astra cars at its Wirral plant in April 2022, although its owner, Stellantis, plans to invest £100 million “with the support of the UK government to ensure an all-electric future at the plant”, according a 2021 announcement.

Nissan always supports a huge giga-factory project in Sunderland, where the batteries will be manufactured close to its production plant, a sign that the company is thinking of manufacturing EV batteries – which are large, complex and, of course, vital for the operation of an electric vehicle – in proximity to where the cars are assembled is important.

The UK has a long history of importing technical products, including automotive components. But while Brexit hasn’t stopped imports or exports, it has made some much more complicated, expensive and uncertain. Years of negotiation towards a divorce agreement between the UK and the EU has left gray areas that are still being worked out. The Economist underline that the crankshaft of a BMW-made Mini has to cross the Channel three times for different stages of its manufacture before it can be installed in a car in the UK. Manufacturing processes like this become much more expensive after Brexit.

Ford also announced layoffs today in Germany, citing a wide-ranging restructuring of its business. As an American company, it’s probably tempted by huge US government incentives invest in a US-based electric vehicle production industry. These incentives are even attract UK businesses– yet another blow to the country’s struggling auto industry.

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