The Government this week published its much anticipated Automotive Sector Deal – the third of the four sector deals promised in November’s Industrial Strategy White Paper.
The Deal, which the Government claims is the first of many with the sector, aims to build on the existing partnership between the Government and industry through the Automotive Council.
It is ambitious in scope and sets out a series of joint investments and long-term commitments between Government and industry. If it all goes to plan, then it will herald a transition towards ultra-low and zero emission vehicles (ULEVs) becoming the norm on Britain’s roads.
£225 million is committed to automotive R&D from 2023 to 2026, with industry providing equivalent match funding. The Deal references the £246 million Faraday Battery Challenge announced in July last year, to make the UK a world leader in the design, development and manufacture of batteries for the electrification of vehicles.
The Deal also brings together several policies announced in the Autumn Budget. This includes the creation of a £400 million Charging Investment Infrastructure Fund (half-funded by the private sector), £100 million to guarantee continuation of the Plug-In Car Grant to 2020, and a further £40 million of R&D funding to explore how to improve EV charging. The Deal also confirmed that there would be no Benefit in Kind charge for EV drivers.
Self-driving cars – or Connected and Autonomous Vehicles as some prefer to call them – also look set to be driving alongside us in the not too distant future. After the Chancellor announced at the Autumn Budget that we will see them on our roads by 2021, the Deal confirms that the Government will invest £250 million, matched by industry, to R&D and the development of testbed infrastructure. Those who find the prospect of driverless cars terrifying may choose to stay away from Bristol, Coventry and Milton Keynes, and Greenwich, where self-drive trials will be held this year.
Twists and turns ahead
Carmakers will be reassured by what is a strong signal of support for their supply chain, as the industry looks to transition towards electric and autonomous vehicles and take advantage of the opportunities of technological change.
While this is the case, the road ahead for carmakers is still full of twists and turns, not least because of the unpredictable nature of the ongoing Brexit negotiations. Industry leaders will take some comfort that their concerns raised at the much publicised meeting with the Prime Minister and Business Secretary, Greg Clark in November were listened to. The Sector Deal reiterates the Government’s commitment to achieving tariff-free and frictionless trade after the UK leaves the European Union.
However, carmakers don’t need reminding that not everything is in the Government’s hands as the starting bell to the second round of Brexit talks beckons. As the Chancellor himself said earlier this week, it takes “two to tango”.
And while the Sector Deal is an important step towards the UK’s transition to ULEVs and connected vehicles, it is only part of the journey. This week’s Deal was about improving supply chain competitiveness and injecting confidence in the industry.
Big questions remain over the UK’s preparedness for the transition, and whether a 2040 ban for petrol and diesel vehicles is realistic. One area where urgent attention is required is how the Government will guarantee the UK’s energy network is able to cope with the demands of the expected surge in EV ownership in the coming years. With this in mind, carmakers will be eagerly awaiting the upcoming publication of the Government’s strategy setting out their vision for the transition to zero emission road transport.
However, in what is such a fast-moving sector, technological developments can make a long-term strategy irrelevant overnight. It will therefore be incumbent on the industry to continue to engage effectively, make their voices heard and position themselves as willing partners of the Government towards this ambition.