New UK Gigafactory Success Analysis
After it was announced that construction on the UK's biggest gigafactory is set to begin this week, we ask experts whether it is likely to go the same way as Britishvolt, which collapsed into administration after millions of taxpayers' money was wasted.
Interview 2
A new £4bn gigafactory has a better chance of succeeding than the failed Britishvolt venture because it has a more defined customer-base, according to an industry veteran.
The expert said there was a “higher likelihood” that the new facility in Somerset, UK, would be sustainable, in contrast to the Britishvolt fiasco which saw the construction of a similar factory halted when the firm went into administration in 2023.
This is because the new factory, which will be run by global battery production firm Agratas, has an obvious customer in Jaguar Land Rover (JLR), according to the expert.
Both companies are subsidiaries of Tata Group, which has promised to invest up to £4bn in the factory.
The expert, who has spent 50 years in the automotive sector, said sector chiefs are hoping the project will rejuvenate the UK’s automotive manufacturing industry through increased and cheaper access to the batteries, for which there is global demand.
This ambition took a hit when Britishvolt’s plans for a gigafactory in the North East were scrapped after the company suffered financial problems while trying to raise funds for the project.
However, while there was “always an unsolved mystery” about who Britishvolt’s customers would be, the expert predicted JLR would be the main – possibly the only – client of the new factory.
The expert said this meant the Agratas factory was a “different story” to Britishvolt, in addition to the investment promised by Tata.
However, the firm will still need to overcome several challenges, including mitigating the factory’s impact on the local natural environment.
The expert believed this issue would “cause some problems”, for example through the need to build solar panels and wind turbines nearby to provide enough electricity for the facility.
They also questioned whether there would be enough demand for electric vehicles, amid uncertainty about whether the government will enforce the phasing out of new petrol and diesel cars by 2030.
The expert said the automotive industry has “always been notoriously poor” at forecasting demand for different types of vehicles, which makes it harder to assess what kind of batteries are needed.
Additionally, investors should follow developments between European nations and leading battery supplier China, as consensus is growing in the continent that it should be less dependent on Chinese imports.
This could result in Chinese being forced to pay tariffs on exports to Europe in a bid to stimulate investment in the continent.
However, such a change of direction would take several years, meaning investors working on a two to three year horizon should stay clear of the sector – the expert said.
Interview 1
Significant supply chain and environmental challenges pose the greatest risk to the fate of a new £4bn gigafactory in the UK, an industry expert has told Hartford.
The expert, who has several decades of experience in the automotive and energy sectors, highlighted lithium mining and tough net-zero targets as key issues facing Agratas, the Tata Group-owned global battery business which is building the factory.
Agratas hopes the factory will be ready to start producing batteries by 2026, and that it will contribute almost half the projected battery manufacturing capacity required for the UK’s automotive sector by the early 2030s.
However, industry is following the new project closely, following the failed attempt by UK-firm Britishvolt to build a similar facility in 2021 which cost investors millions of pounds.
The expert said there were important distinctions between the Tata and Britishvolt schemes, with Tata’s “extensive” global presence in the steel, automotive and hospitality industries suggesting the firm can provide more financial security than Britishvolt was able to do.
However, several risks beyond financial stability remain, the expert explained. A major concern is the supply of rare metals, particularly lithium, which is essential for battery production. The global supply chain for these metals is heavily reliant on China, raising fears that any deterioration in political or economic relations between the country and Europe could disrupt the factory’s operations.
Additionally, the ethical and environmental issues associated with lithium mining, particularly in Africa - where many mines are controlled by Chinese companies - are increasingly problematic. One example is the “horrendous” conditions in lithium mining resulting in deaths of hundreds of thousands of miners, the expert said.
Addressing the environmental challenge, the expert pointed to the UK’s stringent net-zero emissions target which requires vehicle manufacturers to shift to 100 per cent electric vehicle (EV) production by 2030. This target puts immense pressure on vehicle manufacturers who are struggling to meet EV production quotas and are facing substantial fines as a result.
While the gigafactory could help meet these targets through increased battery supply, the carbon footprint of battery production remains high and the lack of adequate infrastructure to support widespread EV adoption, such as charging points, presents additional hurdles – the expert said.
Furthermore, the expert noted that although EVs are currently seen as the future of automotive transport, other technologies like green hydrogen could play a crucial role in achieving net-zero goals by 2050.
This suggests that a multi-faceted approach, incorporating various energy technologies, may be necessary to ensure the long-term success of the UK’s transition to electric vehicles – rather than a reliance on battery-led vehicles.
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