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05 August 2021

Lockdown to Electric Avenue

Nissan has set out plans for a £1bn electric car hub located in Sunderland and in partnership with Envision, which will create a battery manufacturing facility (gigafactory) on site. This news follows a difficult period for the UK automotive sector in the wake of the COVID-19 pandemic, with UK car production hitting its lowest level since 1984 in 2020.

The Japanese car maker has also announced that 1,650 new jobs will be created as a result of the hub and further jobs will be supported in the supply chain of its new generation all-electric car model. This follows the success of its existing Leaf electric car, which celebrated 10 years last year and has been sold across the world over half a million times.

Ideally the plant will start building the new cars in time for 2024, which is when the UK needs to increase the proportion of UK-made components in line with terms for the trade deal made with the European Union. Back in January, Nissan confirmed its existing Sunderland plant was secure in the long term for the new trade deal, which requires at least 55% of the car’s value to come from the UK or EU to ensure no tariffs are applied. This can only be good news for the company given around 70% of the cars made in the plant are exported, most of them to the EU and, therefore, additional tariffs could have had a large negative effect.

When announcing the plans for the new hub, Nissan confirmed it is “moving forward to use Brexit as an opportunity”. In a change of direction from its previous warnings around Brexit and job losses, the bosses at Nissan are confident in the future of UK production and plan to make the most out of leaving the EU.Furthermore, the announcement is a step in the right direction in relation to the government’s ban on petrol and diesel cars from 2030. Prime Minister Boris Johnson has described it as a “pivotal moment” but, while the government is contributing to the project, the overall amount has not been disclosed. It may be that more companies follow Nissan as the government has previously held talks with six car manufacturers regarding building electric car plants.

However, until further plants are announced it is unknown whether enough electric cars will be manufactured to keep up with demand. Transport and Environment (T&E), a clean transport campaign group, has said the UK could be left behind in the production of electric cars, despite the rapidly expanding market, and that car manufacturers here are amongst the worst prepared for change. The UK was one of the first countries to introduce the ban on the sale of petrol and diesel cars but being left behind may result in the UK having to rely on imported electric vehicles. Germany is expected to lead the way in manufacturing in Europe, producing 5.1 million cars by 2030, with over half of them being electric. Greg Archer, UK Director of T&E said, “The Government must show the UK car industry it is serious about ending the sales of cars with engines by announcing a delivery plan to go with its commitments.”

That said, not everyone agrees with T&E’s findings: Mike Hawes, The Society of Motor Manufacturers and Traders (SMMT) Chief Executive told the BBC that the accusation that UK car makers were not preparing for the shift towards electric cars was “utter nonsense” and “rebuilding for the next decade is now well underway with investment in local battery production beginning and a raft of new electrified models in showrooms.”Supporting this statement is a further announcement for “mission critical” plans being submitted for another gigafactory in Coventry, which could create up to 6,000 jobs and be operational by 2025 depending on investment from the private sector. The city is already home to the UK Battery Industrialisation Centre and Jaguar Land Rover, which is another brand that has shown its focus on the future, having already announced it will be all-electric by 2025. As we await further announcements, COVID-19 has highlighted the possibilities around sectors transforming to fit demand and, with nine years still to go, the shift to electric cars could be right on track.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Lockdown to Electric Avenue
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