Why the car in front of you is Chinese

The revival of the motor manufacturing industry was one of the few British industrial triumphs of the 1990s. The arrival of Nissan in Sunderland proved that the UK could make cars competitively, drawing a line under decades of mutual antagonism between workers and their bosses. Toyota and Honda followed, and by 2017, the domestic industry was making 1.7m cars a year, almost enough to balance the value of the imports.

That was the peak of the good news. There has been precious little since. Honda has closed its Swindon plant, Toyota’s future is in doubt, while the old-established manufacturers have almost stopped making cars in Britain. Domestic production has more than halved. Ford plans to make parts, rather than cars, at its plant at Halewood, and has signalled redundancies at its Dunton design centre.

It is hard to see this trend changing. Britain will still make luxury brand cars, but is now marginal as a mass-market producer. One clue to why the decline has been so precipitous is provided by BMW’s mini-making plant at Oxford. The company has decided that it can make electric minis more cheaply elsewhere, but the sale of new petrol-driven cars is to be banned in the UK from 2030, so BMW faced the prospect of making cars that cannot be sold in their home market.

This is so embarrassing that the government is reported to have contributed £75m to help pay for some electric minis to continue to flow from the plant. Most of the rest will end up coming from China, for reasons that will become apparent. This week Stellantis joined the queue for handouts to stay in Britain. It warned that even its cut-down plans to build vans at the “home of the Astra” at Ellesmere Port is under review.

The immediate problem is the importance of batteries in electric vehicles. These are heavy and awkward to transport, and must be made at scale to keep the costs down. As a result, the car plants are gravitating to the battery plants. Nissan has arranged a supply for its Sunderland plant, but there is no prospect of a battery factory for the industry in the UK.

There might once have been, but the farce of BritishVolt was mercifully stopped before public money was committed. It is now too late to join the subsidy wars between the EU and the USA. The UK government seems to appreciate that there is no point in joining what promises to be an over-supplied industry.

Importing batteries is complicated by the “rules of origin” which are designed to penalise imports to the UK and EU from 2024. Putting implementation off until 2027, as the industry is urging, would provide time for European battery plants to get going. By then, they might well be grateful for easy access to what’s left of the UK’s car industry.

The battery factories may be important, but they are secondary to the biggest driver of the car-making industry, one which even threatens the hegemony of the German manufacturers – the price of energy. In Britain and the rest of Europe, green politics is forcing high energy costs onto industry. In China, by contrast, there is a clear-eyed view that cheap energy will allow local carmakers to conquer the world.

Electric vehicles built by Chinese companies are starting to dominate the market there, and will be here in quantity before long. EVs are inherently simpler to build than conventional cars, and much of the accumulated know-how of the west’s manufacturers is of no long-term value. The mass market will go to the manufacturers with the lowest cost energy, which means China not Germany. And these cars, for all their saving-the-planet credentials, will be built with energy predominantly supplied by coal.

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