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North East England's low carbon transport manufacturing sector is growing rapidly, from electric vehicle production in Sunderland to chemicals manufacturing for batteries at sites including Wilton International, in Teesside. We talked to Paul Butler, CEO at the North East Automotive Alliance (NEAA), to find out how the sector is changing, and how the North East cluster is leading the way.
How is the automotive sector changing as it transitions to low carbon technologies?
‘The biggest change for the automotive sector is obviously the move away from internal combustion engines (ICEs) to electric vehicles. This has been driven by legislation, meaning that by 2030 no new diesel or petrol cars can be sold in the UK. Then, by 2035, there’ll be an end to hybrid cars, which have been a useful bridging technology, whilst all new heavy goods vehicles in the UK will be zero-emission by 2040.
‘Another major change for the industry is the push for manufacturing processes to become as carbon neutral as possible. This is being accelerated by the rising cost of energy as well as by legislation as the UK moves towards Net Zero 2050.
‘The speed of the transition to electrified vehicles has been accelerated by the environmental concerns of consumers in relation to the NOX emissions of diesel vehicles and the introduction of low emission zones in major cities, and the same is now proving true for petrol. 46% of all new cars purchased are now electrified. There are 145 models on the market, so choice for consumers is expanding rapidly, and the rate of change is unlikely to slow down. Over the next 8-10 years we are likely to see more change in the sector than in its entire history.
‘When you look at passenger vehicles, 70% of the components will remain the same, however the 30% represents a significant proportion of the vehicle’s cost, including the battery and the power electronics, machines and drives (PEMD), which make up the electric vehicle’s drive train. Battery manufacturing and supply chains need rapid scaling to keep up with demand, and that’s also true for the PEMD industry.’
How is the North East cluster changing and developing throughout the supply chain?
‘The North East cluster is very well set up to respond to the move to electrification. Our electrification heritage dates back to the 1920’s, and today we are the UK’s leading region in vehicle electrification.
‘Today, the North East is home to Europe’s most successful battery electric vehicle, the Nissan Leaf, and the first battery facility in Europe, Nissan’s Gigafactory, which was built in 2012 to supply the Nissan Leaf and acquired by Envision AESC in 2019. We are also a globally significant region for PEMD, and the only region in the UK with the full complement of PEMD activities.
‘Since December 2020, over £3.85bn of electrification investment has been announced for the North East. Two more gigafactories, from Britishvolt and Envision AESC, will take our capacity to in excess of 70GWh. It’s estimated that the UK will need a total of eight of these new larger gigafactories to meet future demand for batteries for EVs.
‘We are committed to zero emission driving and zero emission manufacturing, and will play a major role in the delivery of the UK’s NetZero strategy. The North East cluster is growing and adapting quickly throughout the supply chain as the demand for EVs increases.’
Which have been the most significant recent investments in the North East’s low carbon transport manufacturing capability?
‘There has been massive investment in Net Zero transport manufacturing in the North East over the last few decades. As well as Britishvolt and Envision AESC, major current projects include EV360, a joint project between Nissan, Envision AESC, Nissan, and Sunderland City Council. Turntide Transport have bought Borg Warner, and AVID Technology and Hyperdrive and are investing heavily in the region.
‘There is also strong investment in the building blocks for EV manufacturing. On the Wilton International site, Tees Valley Lithium is building a Lithium processing plant - Lithium is key in EV battery manufacturing - and Peak Rare Earths are building a processing facility for high-grade rare earth concentrate which will produce NdPr Oxide and other separated rare earth products to be used in the manufacture of magnets for PEMD.
‘There are a number of critical key materials that are required for battery manufacturing, and to help the vehicle manufacturers meet the Rules of Origin criteria to qualify for zero tariff trade, which requires vehicles to have 55% UK/EU content. We already have electrolyte production in the region, thanks to investments from Mitsubishi Chemicals, but we must secure Cathode and Anode manufacturing in the UK. Given the North East’s capability in chemical manufacturing, and that the two main customers for those materials are based in the region, the North East has a really convincing investment case.’
Why is the North East cluster proving so successful in investment attraction?
‘The North East is a true beacon of productivity compared to other automotive or general manufacturing clusters across the world. Pre-Covid, productivity for the North East was 16.5 vehicles built per full-time equivalent employee (FTE) compared with 9.1 vehicles per FTE for the UK as a whole. It’s also one of the world’s most automated clusters, with a ‘robot density’ of 500+ per 10,000 FTE workers compared to a UK average of 94.
‘The North East is home to major OEMs including Nissan, Caterpillar, and Komatsu UK, as well as significant EV supply chain companies. And the cluster is further supported by world-leading research and development facilities including the Driving the Electric Revolution Industrialisation Centre (DER-IC), the Digital Catapult, in Sunderland, and the Net Zero Industrialisation Innovation Centre (NZIIC) in Teesside. All these centres undertake collaborative research to support industrial development in the automotive sector. Further opportunities for collaborative R&D are offered by the regions five universities, which all work with industry – Teesside, Newcastle, Durham, Northumbria, and Sunderland. The next big opportunity for the Automotive sector is digitisation, which has real opportunities to transform productivity and competitiveness.’
As the North East’s automotive sector transitions, how is it developing linkages with other key sectors in the region?
‘There have always been close links across industrial sectors in the North East which put the region in a strong position as we move to EVs. Links with the region’s chemicals cluster, at sites including Wilton International, are critical to the EV battery manufacturing supply chain. There are numerous opportunities for collaboration, as can be seen by the recent investments in battery chemical building blocks including lithium, minerals and electrolytes.’
Which regional supply chain gaps would you like to see filled by new investments?
‘Anode and cathode manufacturing for EV batteries is a key strategic gap in the regional, and UK, battery supply chain – we’d love to see this gap being filled here in the North East. It is a big opportunity for Teesside, including Wilton International, with its strong chemicals set and proximity to the region’s two new gigafactories. It’s the ideal location for this type of investment.’
What are the future prospects for low carbon transport manufacturing in the North East?
‘There’s a huge opportunity for the North East to become a true automotive powerhouse, key to the future of EV and Net Zero manufacturing. The region is already transforming from being an incredibly successful vehicle assembly cluster to attracting increased investment in research and development, and EV supply chain manufacturing. As well as individual investing businesses, projects like EV North, a dedicated cluster group, are driving the region’s ambition to be the location of choice for electrification investment.’
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