The competitive nature of the automotive industry is apparent to all, but vehicle electrification is now shaking the industry to its core. Electric Vehicles (EVs) will transform the landscape over the next decade – and Tesla is proof enough of this. In this race for global automotive dominance in a new age of vehicles, every country and every manufacturer is scrambling to steal a lead. In this feature, we speak to Britishvolt and Cornish Lithium to understand some of the factors that will underpin the success of the UK and how it can position itself for future success.
Before we get to that, it is certainly worth noting a recent Protolabs backed survey that interviewed more than 200 senior executives from the European battery industry. It revealed that 84% of UK companies are looking to bring parts of their supply chain closer to their manufacturing base over the next twelve months. In addition, 86% are planning on launching a new battery product or storage system over the same timeframe and 68% believe sustainability and the circular economy will drive the UK’s competitive advantage. The desire to localise supply chains has never been more prominent following the economic global disruption caused by the pandemic, with an increasing number of firms looking to increase the security of supply and speed to market, not to mention reducing their carbon footprint in the process – but there is more to this story.
Britishvolt is a name that has risen to prominence in recent times and MTD spoke with the chairman of a company that is spearheading the U.K.’s first 30GW/h lithium-ion battery production site in the northeast of England. It has also submitted plans for a second site near Coventry airport that will create an additional 6,000 jobs. Discussing the evolution of the industry, Peter Rolton Chairman and UK CEO of Britishvolt says: “The whole lithium-ion battery manufacturing industry is driven by the need for battery manufacturing in the UK. If you go back to when Ralf Speth was CEO of Jaguar Land Rover, he said to Theresa May, ‘either the batteries come to the cars, or the cars go to the batteries’; the UK government was listening. This is the value of the battery. If you import a battery into the UK and put it into a vehicle and then export the vehicle, the maths don’t work because the battery is so expensive there is not enough added value in the manufacturing process. So, to get the maths to work, you need batteries as part of the local supply chain. That was the first imperative.”
“The second imperative was the UK government deciding to take 10 years off the sales deadline for combustion only vehicles. All the car manufacturers thought they had until 2040, and then all of a sudden this moved to 2030. In terms of car manufacturers and model programs, they would have had it all laid out in what they were going to do, suddenly they had to tear it up, throw it in the bin and start again. The third thing that has driven this need has been the Brexit deal. The rules of origin in the Brexit deal with the EU mean that you have to have this increasingly ratcheted local content, which by the time you get to 2027 will be 55% local content. That means cars bringing batteries in from abroad and particularly places like China, to a plant in the Midlands is something that would make the car a Chinese vehicle – and if you export it to the EU, you have import tariffs. So, the batteries are coming to the cars as part of the UK government policy and it is also driven by the Brexit trade deal, and we intend to be the first Gigafactory of that scale in the UK.”
“There is something like 14 Giga site factories being considered in Europe and we want and need to get to market as soon as possible. Even if every factory was built by 2030, there would still be a 25% shortfall in capacity. If there is not enough battery capacity, the car manufacturers cannot produce at the volumes they want. It is a race to affect the transition away from pure internal combustion to electric and hybrid power. The first factory planned is a £2.6bn investment and it will be the biggest investment in the north-east since Nissan arrived in the 1980s.”
Looking at the number of factories required, Peter Rolton says: “The number of factories required will depend on the UK car industry and where the manufacturers set their target numbers. We also have to look at the manufacturers that we will do deals with, in the UK and Europe. The trade deal with the EU27 trade zone means we can make our batteries and move them in that zone without tariffs. It’s not just cars, we also have enquiries from lots of people that want to make buses and another big sector is the light commercial vehicle industry.”
This fascinating insight from the Britishvolt UK CEO highlights why manufacturers are not only reshoring for supply chain security, but also for reasons such as tariffs and Brexit, sustainability, geopolitical factors and more.
Adding his opinion, Bjoern Klaas, the Vice President and Managing Director of digital manufacturing company Protolabs Europe says: “With just 6% of battery manufacturing taking place in Europe, we are still heavily reliant on battery cell imports and, with demand for electric vehicles increasing rapidly, there is an understanding this has to change. The UK’s appetite to be at the forefront of the electrification race is clearly evident, but increasingly pleasing is the determination to create stronger domestic supply chains that can support battery development and production. Sustainability means the entire value chain from raw materials, supply chain, manufacturing and recycling – will all need to comply with strict Environmental, Social and Corporate Governance (ESG) criteria.”
The supply chain
Looking more closely at the supply chain and sustainability factors that Protolabs’ Bjoern Klaas has mentioned and where UK PLC positions itself as we move to a new dawn in vehicle technology, MTD interviewed Mr Jeremy Wrathall, Founder and CEO of Cornish Lithium. Cornish Lithium is a company that was founded in 2016 when Jeremy Wrathall considered the massive move to electric vehicles and the raw material demand for lithium and other raw material commodities. The company has acquired mineral rights agreements over a large area of Cornwall that reaches almost 600sq/km onshore and another 400sq/km offshore.
Discussing the importance of sourcing materials like lithium and its importance to the UK manufacturing sector, Jeremy Wrathall says: “It’s hugely important, especially with the recently introduced rules of origin through Brexit. This means that up to 60% of a vehicle will have to be sourced from the UK or Europe. The problem is that neither the UK nor Europe produce any batteries or create lithium at all from a domestic source. In order to meet that 60%, it’s going to be very difficult without a domestic source of lithium. In electric vehicles, the battery pack makes up roughly 50% of the value of the vehicle, and of the battery pack 30% or more is made up of the value of the raw materials.”
“This means to get to 60% of the value of the vehicle produced in the UK or Europe, in my view necessitates a domestic source of supply. The UK needs to have that source of supply because directly and indirectly in the UK, the automotive industry employs about 800,000 people. If we lose that industry, it would be catastrophic for the UK. So, a secure and sustainable supply of lithium and other battery metals will make a huge difference to the UK economy. Every tonne of lithium that we can produce here is a tonne that we do not have to import.”
Digging for Success
Taking a closer look at the issue of supply and demand, Jeremy says: “We are definitely in a supply and demand deficit. We were in a surplus where lithium prices dropped from US$21,000 per tonne to nearly $6500. That situation has now dramatically reversed as we have moved to much faster electric vehicle adoption. Norway is a good example of that. They have achieved 80% electric vehicle adoption in roughly 3 years. At the moment, the global industry produces around 400,000 tonnes of lithium carbonate equivalent every year and we expect that demand to rise to over 2,000,000 tonnes in the very near foreseeable future, in the next 10 years or so.”
“The global industry will not be able to reach that number and that has really caused the automotive industry to wake up. It’s fine to be building mega factories and cars, but if you don’t have the supply, that could severely constrain the adoption of electric vehicles. The biggest problem is that people think lithium is an abundant material, which it is, but it is not abundant in economic sources. Economic sources are very difficult to find, particularly in Europe where those potential deposits are constrained by geography or population or other considerations. So, it is a huge challenge for the mining and mineral extraction industry to rise to this challenge and build enough capacity.”
“The Faraday Institute, which is a government institute has forecast the demand for the UK. It reports that the UK alone by 2035 will need 75,000 tons of lithium. To put this in context, that is currently 1/5 of the existing global supply right now, so we are facing a big global issue. The potential of lithium in the world is very large, but is that lithium economic and can it be mined sustainably.”
“In Cornwall, we are very aware that this lithium is there and we believe it spans over a very large area. At the moment, we are prepared to say that we could produce 10,000 tonnes a year from our project in Cornwall. There is another company called British Lithium and they said they are going to produce 20,000 tonnes a year, but if you contrast that 30,000 tonne total with the demand of 75,000 tonnes – we are nowhere near there. From our geothermal operations, we think we could produce quite a bit, but at the moment we don’t know exactly how much there is or how long it would last. However, we do think there is a lot and we do think it will last a long time and that industry will grow quite dramatically over the next 10 years.”
“There are between 30 to 50kg of lithium in each vehicle battery. This is why we are seeing demand ramping up so quickly. As we move to higher-powered vehicles and solid-state lithium batteries, that demand is going to go up,” says Jeremy Wrathall.
The tectonic plates are shifting in the automotive industry and over the next decade, the evolution of the sector will undoubtedly create winners and losers. Will the household brands of today eventually be swept aside by new market entrants in the future? One thing is for certain, whether the power generation units for future transport will be battery, hydrogen or another power source, the success of the frontrunners of tomorrow will depend more than ever on the proximity and abundance of natural resources and the effectiveness of the supply chain.
