The charge towards change: The UK auto industry’s path to electrification

The transition to battery electric vehicle (BEV) production will play a decisive role in shaping the future prosperity of the UK’s automotive sector. The shift from internal combustion engines (ICE) to BEVs is not just a matter of technological evolution but an economic imperative that will influence the industry’s contribution to jobs, economic output, and global competitiveness.  

A new CBI Economics report, commissioned by the Energy and Climate Intelligence Unit (ECIU), Electrifying Growth: Exploring what electrification could mean for the UK’s automotive industry, takes stock of the current UK automotive sector, outlining how the sector remains a cornerstone of the UK economy in 2023. The report goes on to assess how the industry could fare in the coming years, specifically the potential economic impacts different levels of electrification could have on the industry and the wider UK economy.

A Cornerstone of the UK Economy: The Current Strength of the UK Automotive Industry

The automotive industry is a key contributor to the UK economy, generating £46.8 billion in Gross Value Added (GVA) and supporting over 552,000 full-time equivalent (FTE) jobs. In 2023, the UK produced just over a million motor vehicles, ranging from conventional petrol and diesel cars to hybrid and electric models. Despite the increasing focus on electrification, the majority (93%) of vehicles produced in the UK are still non-BEVs—comprising of hybrid vehicles and traditional petrol and diesel cars.

The UK automotive sector is also a key contributor to UK exports, with only 21% of vehicles produced being sold domestically. The remaining 79% are exported, with the European Union being the primary market (receiving one-third of UK exports), followed by the US (15%) and China (9%). This strong export orientation highlights the sector’s significance in supporting the UK’s trade balance and economic health.

The Electrification Imperative: The Need to Scale Up BEV Production

As the global automotive landscape shifts towards sustainability, BEVs are emerging as the future of the industry. To remain competitive and secure its economic contributions, the UK automotive sector must transition to BEV production. The speed and scale of this transition will significantly influence the sector’s future size and economic impact.

Under the most optimistic scenario modelled by CBI Economics, where the UK rapidly scales up BEV production to meet growing consumer demand, the total GVA contribution of the automotive sector could increase by 35%—adding £16.1 billion, in real terms, to the economy by 2035. This growth could translate to an additional 167,000 FTE jobs, reinforcing the sector’s role as a key economic pillar.

Conversely, in an absolute worst-case scenario where BEV production fails to grow from current levels and fails to meet growing consumer demand in domestic and export markets, the automotive sector’s GVA could shrink by 73%, representing a loss of £34.1 billion. In this case, employment would be severely impacted, with the sector forecasted to support 404,000 fewer jobs by 2035. Fortunately, the likelihood of the sector standing still is minimal, as major automotive manufacturers, such as Jaguar Land Rover and Nissan, have already committed to significant investment into the electrification of UK based production.

Final Thoughts: The Future of the UK Automotive Industry

The UK’s automotive sector stands at a crossroads. Its success in transitioning to BEV production could not only secure its future but also reinforce its position as a driver of economic growth, employment, and prosperity. The research by CBI Economics suggests embracing electrification is the preferred option for the UK economy. With the right strategies in place, the sector has the potential to thrive, driving a greener and more prosperous future for the UK.

To enable the automotive industry’s transition, significant investment and government support will be required. This includes creating a business environment that allows the scaling up of battery production, securing of supply chains, and ensuring that the workforce is equipped with the skills needed for BEV manufacturing. It also includes creating an economic environment that ensures demand for BEVs continues to increase. Policymakers and industry leaders must work together to create this environment, ensuring it supports innovation, investment, international competitiveness and demand.

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