Budget boost for automotive manufacturers; but does the UK have scope to grow the electric market?

The start of a recovery?

It’s disappointing to see the latest UK car production statistics suggest that the industry has had the worst February in a decade, but no surprise. Lockdown restrictions continue to acutely impact manufacturers’ confidence to increase automotive production. However, perhaps some shoots of recovery are starting to appear. Car production increased by around 20 per cent from the previous month and the budget announcements at the start of the month should be seen as hugely encouraging for the sector too. 

The budget 

We should start to see more optimism within the industry as the reality of key announcements in the Budget, such as Freeports, the 130 per cent ‘super-deduction’ for capital spending and the planned review of research and development (R&D) tax relief provide a hat-trick of good news for car manufacturers in the UK; and particularly those looking to invest in the UK. 

Take the Freeports as an example, the beneficial tax breaks on goods that arrive into the Freeport; reduced property taxes and lower national insurance for new staff presents a great deal for automotive manufacturers looking to invest in new sites. Add to this enhanced tax breaks for capital expenditure and favourable R&D relief; and the UK is firmly positioning itself as the place to manufacture. 

Electric and hybrid vehicle production increases - but can the UK secure long-term growth?

Meeting ambitious environmental targets by 2030 is still the elephant in the room. Production for electric vehicles, plug-in hybrid and hybrid vehicles increased by 23,019 units (25.3%) for the same period last year. Perhaps the rollout of government initiatives such as the introduction of Clean Air Zones and improved EV charger infrastructure is making consumers consider EVs.

On one hand it presents a real opportunity for innovation in battery technology; but on the other, the industry will still be reliant on importing resources from areas with cultural differences in order to produce electric vehicles. So, the question is, is there really scope to grow our charging infrastructure and battery technology, based on a limited international resource, which themselves have questionable environmental credentials. Until the cost of electric vehicles can be reduced to levels similar to ICE, the transition to all electric looks unlikely.