The UK government injects £4.5bn into strategic sectors, with £2bn for the automotive industry, signaling a green revolution. Nissan swiftly follows, investing £2bn in electric car production at its Sunderland plant. Digital twins and self-driving cars make the cut.
The UK government has unveiled a £4.5 billion ($5.68 billion) funding initiative, with a keen focus on eight strategic sectors. Among them, the automotive industry is set to receive over £2 billion in targeted investment, signalling a concerted effort to fortify the sector’s central role in the nation’s economic growth and its commitment to sustainability. The substantial allocation for the automotive industry comes with a clear directive: advance the manufacturing, supply chain and development of zero-emission vehicles.
This injection of funds acknowledges the automotive sector as an important player in the global shift towards a net-zero future.
Global transition to net zero: a driving force for automotive production
Within the expansive funding framework, £960m has been designated for the clean energy sector, further feeding into the automotive production pot which occupies multiple positions across the funding categories as the industry pushes towards electrification. Recognising the automotive industry’s centrality in the worldwide transition to net zero, the funding aims to support transformative changes within the sector.
The emphasis on zero-emission vehicles underscores the government’s building commitment towards sustainable transportation solutions, and will offer a much sought-after boost. This funding initiative is not a short-term fix but a strategic play in the government’s long-term vision.
Aligned with the Prime Minister’s commitment towards long-term economic growth, with inherent implications for automotive production, the aim is to position the UK as a leading hub for innovation and growth across the manufacturing sector.
Advanced manufacturing plans and regulatory support: digital twins
Building on the expertise of industry-backed recommendations, the government has accepted all 14 proposals from Professor Dame Angela McLean’s review of “the role that regulation and standards can play in driving innovation and growth in advanced manufacturing.” Among them is the proposal of accelerating the deployment of digital twins, particularly relevant in the automotive sector where they offer transformative approaches to product development, manufacturing and maintenance.
Future investments and initiatives: self driving vehicles
Beyond the immediate injection of funds, the government is committed to extending the Connected and Automated Mobility Research and Development program, securing a first-mover advantage in self-driving vehicle deployment. Moreover, the upcoming release of the UK’s first Battery Strategy, a Hydrogen industry taskforce, and the Advanced Manufacturing Plan will further solidify the government’s comprehensive approach to supporting and advancing the manufacturing sector. The announcement comes ahead of the second Global Investment Summit, positioning the UK as a hub for innovation and growth across various sectors.
According to Gov.uk, it underscores the nation’s commitment to leading the global transition to net zero while seizing opportunities in the emerging green economy.
Insight from Daniel Harrison, automotive analyst at Ultima Media
The UK automotive industry faced challenges, including plant closures, semiconductor shortages and Covid-related disruptions, resulting in a 66-year low in car manufacturing in 2022 (775,014 cars, down 10% YoY), according to SMMT. Factors like the closure of Honda’s Swindon plant and BMW ending electric Mini production added to the industry’s woes.
Despite this, recent data from May 2023 signals recovery, with under 133,000 new registrations and a 6% production increase in Q1 2023 (almost 220,000 units), according to an EY report.
Most notably, a 33% rise in fleet and a 59% surge in battery electric sales drove this growth, indicating a clear shift toward alternative fuel vehicles and a zero-emissions future. With this new UK government investment announcement, many are sure to see the future of the industry as moving both willfully and swiftly into the green. But is this the case?
Daniel Harrison, Automotive Analyst at Ultima Media provided comment, saying “the economic reality is that all countries are now in a subsidy race to secure the future of the automotive industry.
”Some may call it protectionism, but when virtually every region and country is luring investors with government money, the UK has no choice but to follow suit if it wants to retain a car industry here in the UK. Whilst this announcement of £4.5 billion for UK manufacturing is a welcome step in the right direction, it does just amount to 0.2% of GDP and is relatively modest in its scope and ambition.”
“This compares to the US’s Inflation Reduction Act (IRA) which is worth $369 billion (or 1.6% of their GDP), so in pure financial terms, that is 8 times as ambitious.”
Despite this, there are still grounds for confidence. Harrison added, “nonetheless, the strong £2 billion specifically dedicated to boost UK automotive manufacturing at least prioritises the sector after decades of ideological laisser-faire policy.”
But as we all know, such investments and drives towards sector recovery and growth require constant care, and many in the automotive industry still have questions about strategies concerning viable infrastructure. Harrison commented on this, saying, “however, the really significant part will actually be next week’s Battery Strategy announcement and how we are going to attract gigafactories there to underpin the green transition for the UK automotive industry. Without a coherent battery strategy, there will be no car industry in 10-15 years.”
So there many be cause for concern. It will all depend on not just the right funding, but the right right infrastructure and startegic investment. “The £4.5 billion also comes very late in 2025-2030, and we are already seeing evidence of the IRA pulling investment away from the UK and EU.”
Nissan quickly takes the lead following UK Government funding announcement
Swiftly following the government announcement of its investment plans, Nissan disclosed it will invest £2 billion in the production of three electric car models at its Sunderland plant in a significant and supportive move for the UK’s automotive industry. According to the OEM, the forthcoming electric models - the Qashqai and Juke - will join the electric Leaf, the production levels of which will necessitate the establishment of a third gigafactory, according to Nissan.
The new battery plant will complement the current factory adjacent to the car plant, with the construction of another gigafactory already underway through Nissan partner, AESC.
In a show of support, the government has granted investment zone status to the north-east of England, providing businesses with tax breaks. The designation reflects the government’s confidence in the UK’s automotive sector according to Gov.UK, and is expected to further cement Sunderland’s position as a key hub for electric vehicle innovation and manufacturing following the government’s recent investment announcement.
To facilitate Nissan’s ambitious project, the UK government has extended support through the Automotive Transformation Fund, which received a substantial £2 billion top-up during the Autumn Statement. The government’s explicit affirmation of an “investment zone” in North East England is forecasted to yield over 4,000 additional jobs over a five-year period.
This injection of capital and support is paramount for the UK’s automotive industry, a sector already making a substantial annual contribution of £71 billion to the country’s economy, and set to grow further following these latest important developments.