The need of the hour – Electric Vehicles
In the latter half of the previous decade, there has been a consistent effort from governments and businesses around the world, to move from being carbon-producing entities to becoming carbon neutral entities, a shift that has been primarily driven by pressures from lobbies around the world to curb climate change. This shift has also affected the world’s biggest automotive companies as well as luxury car makers, who are now looking to shift their strategies from designing and manufacturing vehicles running on fossil fuels, which have had an adverse effect on the environment, to producing electric vehicles, which can contribute to them becoming carbon neutral.
The phenomena have resulted in a sudden boost in electric vehicle (EV) take-up. Some consider this to be an excellent advancement in removing fossil-fuelled vehicles from the streets, others, are not entirely backing the idea. Not all the reactions that have been raised can be called reasonable, as the carbon obligation related to the EVs or battery production might be high, but it has already been debated, it will be paid off even faster if EVs utilise green energy. The process of calculating carbon productions and neutralisations is a bit cumbersome and complicated, as it relies upon what power sources are utilised for charging as well as for Electric vehicle as well as battery production. In any case, there are clear savings from carbon emissions.
A recently conducted research by the UK Energy Research Center (UKERC) recommended that as a major aspect of a more extensive program of technical fixes as well as a reduction in the demand in all vehicle segments(including aviation), EVs could help lessen the UK transport emissions by around 25 per cent by 2050. This rate would ascend to half if people can agree to make some lifestyle changes, such as the reduction in the usage of transport.
Fears around Brexit
UK Automotive Industry has consistently voiced their concern around the fact that a ‘Hard’ or a ‘No-Deal’ Brexit would be extremely devastating for the industry, primarily because of the fact that European Union makes up for 57 per cent of UK’s total exports of automotive around the world, which would add billions of dollars in costs and tariffs, leading to jobs in this sector being at risk, amongst many other uncertainties. For the United Kingdom automotive industry to flourish, it is imperative to have frictionless trade relations with the European Union and hence a deal-based Brexit would be the most prudent solution.
Growth of the EV Car Segment in the UK
The Society of Motor Manufacturers and Traders (SMMT), one of the largest trade associations in the United Kingdom automotive industry, which releases all kinds of information on the UK transport industry using various kind of parameters. In a recently concluded study, reported the number of EV registrations in the United Kingdom in the month of December as well as for the year 2019. The trade associations reported a reduction of around 19 per cent year on year in the number of Diesel vehicles registration for the month of December 2019, which were at 33,884 as opposed to 41,846 in December 2018. This reduction was reported to be at 21.8 per cent for FY 2019, as opposed to the entire FY 2018. The market share of Diesel vehicles also declined from 31.5 per cent in 2018 to 25.2 per cent in 2019.
In terms of the Battery Electric Vehicles (BEV) registrations for the year 2019, the SMMT reported an increase of 144 per cent year on year, while the market share also grew from 0.7 per cent to 1.6 per cent. For the month of December, the increase in the number of registrations was at a massive 220.7 per cent year on year, while the market share also increased from 1.1 per cent to 3.3 per cent. Similarly, the number of registrations in the month of December for Plug-in Hybrid Electric Vehicles (PHEV) were up by 21.8 per cent year on year and for Hybrid Electric Vehicles (HEV) were up by 34.4 per cent year on year. For FY 2019, HEV registrations surged by 17.1 per cent year on year.
These data clearly show the growth in the usage of Electric Vehicles in the United Kingdom, especially in recent months, as well as the reduction in the dependency of traditional vehicles running on fossil fuels. This has caused a huge influx in the demand for various kinds of Electric Vehicles in the United Kingdom and hence, there has been a requirement for large “Gigafactories” that can support this kind of demand.
What is a Gigafactory?
The Term “Gigafactory” was first used by Entrepreneur and CEO of Tesla, Elon Musk, for one of Tesla’s lithium-ion battery and EV production facilities in the United States. Gigafactory has now become a commonly used term to describe any large plants, that engages in the business of battery production for electric vehicles, production and designing of electric vehicles or charging stations. It is also used for the facilities that support the production of all three. A typical Battery Gigafactory is responsible for processes like mixing of copper and aluminium foil, Cell stacking, Tab welding, Electrolyte filling, formation of cells, arrangements and testing, Module housing, which result in the formation of final module of a battery, which is then ready to be placed in an electric vehicle for final use by the end customer.
Demand for Gigafactories in the UK
A recently concluded study by the Faraday Institution, which is an organisation that engages in the research and development around electrochemical energy and storage, stated that due to the increase in the demand for the Electric Vehicles in the United Kingdom, at least one Gigafactory would be required to be built in the UK by the year 2022 and at least two by 2025, to support the production of batteries in concurrence with the ever-increasing demand. China is currently the world leader in production and distribution of the Lithium-ion batteries which are used around the world, and the European Union is playing catch up to China as per the research. The Faraday Institution believes that European Union would make up for 14 per cent of the global battery supply by 2023 and 17 per cent by 2028, which might prove to be extremely competitive for the Chinese manufacturers primarily because of the low transportation costs for the European Manufacturers. The research finally states that the United Kingdom needs to move fast in terms of building Gigafactories, primarily because of the amount of time it may take to build a new factory, the process of which includes locating new sites as well as obtaining necessary approvals and licenses, which could be time taking.
In the longer term, the research predicted that Electric Vehicle battery production in the United Kingdom would reach 130 Gigawatt Hour (GWh) per annum by the year 2040. This kind of demand would only be fulfilled by at least 8 Gigafactory, if an assumption of a capacity of 15 GWH per annum per factory is kept in mind.
Another factor around this is the creation of jobs, as predicted 8 Gigafactories by the year 2040 will create employment for around 186,000 to 246,000 individuals in supply chain and distribution as well as in the overall automotive industry.
The demand for EV batteries has been rising consistently and is expected to rise in the near future as well. The United Kingdom will have enough demand to support production from one Gigafactory in the early 2020s, the challenge will arise to bring global firms onboard for additional Gigafactories and facilities, primarily because of the neighbouring countries such as France and Germany are providing huge financial as well as administrative benefits to global firms. The UK needs to create risk-free investment format for these Battery Manufacturers to set up facilities in the country to support the long term demand and provide skill development and training infrastructure for these companies to operate efficiently.