Covid-19 has highlighted a significant problem in the UK’s manufacturing supply chain

Kevin Brundish, CEO of AMTE Power, commenting on the need for a strong, onshore supply chain in the face of global uncertainty.

Recent trade wars and political uncertainties have exposed the UK’s reliance on offshore supply chains, highlighting the threat to the effectiveness of the country’s manufacturing industry. This is especially pertinent when it comes to the unprecedented transition to electrification as the Government strives to meet its ‘Road to Zero’ targets.

The lithium ion battery is a crucial part of manufacturing an electric vehicle (EV) – representing nearly a third of the total cost – and battery manufacture is struggling to keep up with demand. Yet the market is still dependent on a few large-scale, offshore manufacturers for cell supply, with demand from major OEMs in danger of outstripping existing supply. This approach is both risky and creates uncertainty, and since December last year, the recent coronavirus pandemic has brought the nature of the UK’s supply chains into sharper focus.

Numerous car makers, including Jaguar Land Rover (JLR), faced halted production lines and closures as a direct result of China’s supply. JLR produces nearly 400,000 vehicles a year[1], and yet this output was being threatened by offshore suppliers over which it has little control. This highlights how unstable a near total reliance on key components from the Far East is for UK car makers.

Nevertheless, disruptive areas of manufacturing – such as the electrification of cars – provide a key opportunity for the country to build out an independent supply chain and infrastructure.

2020 has been labelled the year of the electric car, with many new models being introduced for consumers. This exciting news will consequently drive demand for the lithium-ion cells used at the heart of this new product revolution. The potential for Britain’s electric car industry is enormous – the market forecast is £8.7 billion by 2030, with an estimated 980,000 vehicles being made a year, leading to the creation of 103,000 jobs[2]. In order to meet this demand, having a robust onshore supply chain is crucial.

The problem remains however, that UK businesses currently require investment in order to realise the full scale of this potential.
Despite the British battery market forecast to be worth £5 billion by 2025[3], the UK is not currently designed to cope with the impending transition to electric vehicles – regardless of the UK Government’s banning of new petrol and diesel cars by 2035. In order to keep up with this evolving market, the UK Government needs to continue to prioritise the creation of onshore, full cycle battery plants instead of relying on large scale manufacturers abroad. It’s costly and increases carbon footprint to have these batteries imported – the very thing the UK Government is trying to reduce.

The UK has the talent and capabilities at home to maintain its excellence and history in niche automotive manufacturing, and the shake-up of the supply chain is likely to draw in investment and start to revitalise Britain’s car industry. Today, China accounts for more than $40 billion in auto parts production[4], some of which could be flooding into the UK manufacturing market if a robust onshore supply chain is established. This will not only provide greater support for the transition to EV technology, stimulate the economy and create jobs, but diversify the supply chain helping to mitigate the reliance on unpredictable external factors – such as Covid-19.
 
[1] https://www.bbc.co.uk/news/business-51548976
[2] https://www.itproportal.com/features/its-electrifying-what-does-the-future-spell-for-the-auto-industry/
[3] https://www.globenewswire.com/news-release/2020/01/28/1975953/0/en/50-Billion-Consumer-Batteries-Market-Analysis-to-2025-Consumer-IoT-Smart-Homes-and-Home-Automation-Boosts-Deeper-Engagement-with-Digital-Technologies-Driving-the-Consumer-Batteries.html
[4] https://www.forbes.com/sites/edgarsten/2020/02/18/coronavirus-exposes-lack-of-auto-industry-plan-b/#1aa953805e02

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