Automotive industry in the UK debate

The automotive industry saw significant growth during the 2000s and early 2010s, but output has declined since 2015 due to factors including Brexit, the Covid-19 pandemic and falling demand for exports.

A key issue facing the industry is the availability of UK and EU manufactured batteries for electric vehicles.

The terms of the UK-EU trade agreement will place a 10% tariff on electric vehicles traded between the UK and EU which contain batteries made of components predominately manufactured elsewhere.

Economic data

In 2022, the manufacture of motor vehicles and parts contributed £13.3 billion to the economy, 0.6% of the UK’s total output. 

This counts the value of sales from UK car manufacturers, minus the value of intermediate costs (such as the costs of raw materials).

The automotive industry also includes elements of the supply chain not captured in the manufacture of vehicle manufacture.

For example, the wholesale and retail trade and repair of motor vehicles contributed £30.6 billion to the UK economy in 2022, equivalent to 1.3% of total output.

While the total number of cars manufactured in the UK in 2023 is up on the same period last year, it is still far short of the level seen in the mid-2010s, when over 1.5 million cars were manufactured each year.

The Society of Motor Manufacturers and Traders (SMMT) projects 860,000 cars to be manufactured this year, and the possibility for production to reach the million mark by 2028.

Employment and employers

In 2021 (the latest available data), around 160,000 employees across the UK worked in the manufacture of motor vehicles industry, around 0.6% of the total.

Regions with higher levels of employment in the industry include the West Midlands, (2.2% of all employees worked in the industry) and the North East of England (1.2%).

The West Midlands is the home of Jaguar Land Rover, while Nissan has a large factory in Sunderland. According to the SMMT, these were the top two companies in terms of number of cars manufactured in 2022.

Other major manufacturers include MINI (based in Oxford), Toyota (with factories in Derbyshire and North Wales), Vauxhall (in Cheshire) and Bentley (in Crewe).

Recent developments

Rules of origin tariffs on electric vehicles using foreign-made batteries

Currently, electric vehicles can be traded between the UK and the EU tariff-free provided materials used in the production of the car originating from outside the EU or the UK do not exceed 60% of the value of the vehicle and 70% of the value of the battery pack or cell. 

These requirements are due to be become gradually more demanding from the start of 2024. By 2027, non-originating materials must account for less than 30% of battery packs, 35% of battery cells, and 45% of the total value of the vehicle, for it to avoid a 10% import tariff.

Tata Group has announced £4 billion to build a new electric car battery factory, creating up to 4,000 jobs. The government estimates the factory will provide almost half of the battery production needed by 2030, 40GWh.

Other investments

On 11 September 2023, BMW announced it would invest £600 million into the Oxford MINI plant to convert it to all-electric production by 2030, with production of two electrified models starting in 2026. 

Earlier this month Stellantis’s site at Ellesmere Port in Cheshire became the first all-electric vehicle production plant in the UK, following a £100 million investment. 

In July, Renault in partnership with Chinese car manufacturer Geely announced a new joint company manufacturing engines would be headquartered in the UK, with engine plants and research centres located across the world.