Automotive Industry

Debate between Jonathan Reynolds and Gareth Johnson

Wednesday 12th July 2023 Commons Chamber

[Jonathan Reynolds]

I do not know whether I am supposed to declare an interest, but I drive a Toyota hybrid myself—I have a large family and have to get between Manchester and London, and that is a pretty sound option for doing so. I am aware of the issue that my hon. Friend raises, as is the shadow Transport Secretary, my hon. Friend the Member for Sheffield, Heeley (Louise Haigh). We must be careful to ensure that there is certainty so that that transition we are all seeking can happen. I know that there are particular issues relating to that sector and that side of the industry. We are alert to those issues, and we will, of course, work with him, his constituents and the expertise in this country and beyond to ensure that that timescale is done properly. For many people seeking to make the transition—we are seeing a huge response from the public on that—that is the option that is currently available, particularly for families. We must bear in mind that the solution has to be something that works for all our constituents, and we must be cognisant of their concerns. I am grateful to him for raising that point at this stage of the debate.

I worry at times that the Government, and maybe especially the Secretary of State for Business and Trade, do not have a great deal of time for industry at all. Artificial intelligence, tech and financial services are all crucial sectors, but we should not for one moment think that there is no role for industry. Nor should we ever believe that there is a false choice between services and manufacturing. Support for the automotive sector is not nostalgia. Many of the plants that we will talk about in the debate are the lifeblood of their communities, providing good work and good wages. However, just as in other crucial industries—steel is another good example—I get no sense that securing the long-term future of the sector and managing the transition to a low-carbon economy are priorities for the Government.

That is not just the view of the Labour party; it is what industry itself has been telling the Government. Mike Hawes of the Society of Motor Manufacturers and Traders said at its recent conference:

“We…need a…response urgently”.

Stellantis has warned that:

“If the cost of EV manufacturing in the U.K. becomes uncompetitive and unsustainable, operations will close.”

The automotive industry faces a series of challenges that must be taken seriously. The rules of origin, which are due to come into force from January next year, will require 45% of a vehicle’s value to be made in the UK or the EU or a 10% tariff will be imposed that will destroy most profit margins entirely. Of course, those requirements increase significantly over time. We have a lack of progress on battery manufacturing; Germany already has 10 times the battery-making capacity of the UK. We have wider business challenges, including the highest industrial energy costs in the G7, and rising inflation and borrowing costs.

However, what we have seen from other countries is that none of those challenges is insurmountable. Other countries are pulling ahead. China is home to numerous battery giants such as CATL and BYD, while the United States famously has Tesla. But the EU has also ramped up battery production through initiatives such as the European Battery Alliance and how has 35 battery factories in place. In contrast, the UK is yet to develop a robust battery manufacturing sector, which makes us heavily reliant on imports and risks the long-term presence of automotive production in this country.

I think we all recognise that, over time, vehicles will be built where the batteries are made, not the other way around. We will never be able to match the sheer fiscal firepower of the US Inflation Reduction Act, but we do have advantages—competitive advantages on workforce and skills, and on research and development—and if we had a Government with sufficient political commitment, the future could be very bright indeed.

[Gareth Johnson (Dartford) (Con)]

Last month, I visited the new Caterham Cars production plant in my constituency, to which the company has had to move because its production is insufficient to meet the demand that it has at the moment. It will take on more employees and apprentices, and it will manufacture more of the vehicles for which it is famous. I remind the shadow Secretary of State that that expansion in the industry has happened under a Conservative Government. Does he welcome that news?

[Jonathan Reynolds]

I am incredibly happy to welcome that news and the positive story that the hon. Member sets out, but I do not think that any of the success that he has seen detracts from the fact that there are significant policy challenges. The overall number of vehicles has declined, as he will know, and yes, the pandemic and the semi-conductor supply chain issues happened, but that does not remove the need for this House to take seriously the rules of origin, the battery-making capacity and so on. We are not in any way on track. There is also, frankly, the international competitive position. Other countries are simply indicating that they want those industries and that investment much more than we do. It is not so much that the Conservative party has turned up to a gunfight with a knife, but that it is not showing up to the fight at all.

What we need is a plan of action. That is what the Labour party has developed, and it is what we want the chance to implement should we form the next Government. Our plan addresses battery capacity and charging infrastructure, as well as key issues such as planning and grid regulation. We are up front about the challenges that we face, but we are ambitious for the future. Frankly, that is nothing short of what is required. Our plan starts with having an active industrial strategy. I know that some Conservatives do not like that kind of terminology, but I say simply that all countries need an industrial strategy. To go back to the example of Nissan, that was part of an explicit strategy—by even Margaret Thatcher’s Government—to attract automotive expertise to the UK. The absence of any coherent modern industrial strategy is hurting investment into the UK.

Other countries are simply pushing ahead, recognising that the challenges that we are facing have to be met nationally by Governments with skin in the game. Industry is crying out, first, for stability, and secondly, for a partner and some clear policy signals. That is exactly what it will get from a Labour Government. That is why we have said that we would put the new Industrial Strategy Council on a statutory footing, giving some reassurance that the instability of the Conservative years is at an end.

Our green prosperity plan will part-fund the battery-making gigafactories that are so essential to our future. That will be catalytic public investment to unlock the much greater sum of private investment we need. The reality is that no battery factory in the world has been developed without that kind of Government commitment. We know that the Government are in talks with some firms about potential investment decisions, and I say in good faith to Ministers, “That is good. We want you to succeed.” Where those companies need assurances from the Opposition should a change of Government occur, we will of course have those talks. However, it would be far better and a far better deal for the taxpayer to make those offers publicly, and to be negotiating with a range of potential partners to get the best deals for Britain, because domestic battery production is so important.