The chair of the company behind the first new car plant in Britain for more than a decade has urged the UK and European governments not let Brexit ruin the country’s automotive industry.
Carl-Peter Forster was speaking as the London Taxi Company (LTC), the maker of London’s trademark black cabs, officially opened a factory in Coventry to build electric taxis. The plant will create more than 1,000 jobs and is funded with investment worth £325m from the Chinese car company Geely, which owns LTC.
The Coventry plant is the first site in the UK dedicated to the production of electric vehicles. It covers the size of nearly 20 football pitches and has capacity to manufacture 20,000 vehicles a year. LTC and Geely will also make small electric vans at the factory, which the companies believe could be a new growth market. They are looking to export the electric taxi outside London, but will focus on the UK first.
Greg Clark, the business secretary, said the new factory and Toyota’s announcement last week that it will invest £240m into modernising its Derbyshire production line is “recognition of our seriousness in the industrial strategy”. He was very confident about the future of the car industry in Britain, he said.
Forster, the former boss of General Motors Europe and Jaguar Land Rover, urged the UK and EU to reach a mutually beneficial deal for the automotive industry as part of Brexit.
“I think there is a mutual interest on both sides not to disrupt … and kill this very positive collaboration” between the UK and European car industries,” he said. “We bank on all governments to keep that in mind.”
Forster said sterling’s depreciation since the referendum had already hurt LTC’s profit margins, but added: “We will somehow live with it.”
On the potential terms of Brexit, he said: “We need a stable and level playing field in terms of trading, rules and regulations. We bank on the UK government to keep that in mind.”
Automotive industry bosses have consistently said that leaving the single market and the customs union could have a damaging impact on UK plants because of the number of cars exported and the high proportion of car parts imported. Around half the parts for the new electric taxi made at the Coventry factory will come from outside the UK.
A report by PA Consulting said earlier this week that the cost of assembling a car in Britain could increase by £2,370 in the event of a hard Brexit, forcing some manufacturers to look at moving production out of the country.
The increase in costs – equivalent to more than 10% per vehicle – would hit if Britain falls back on World Trade Organisation rules after leaving the EU. Even if the UK agrees a tariff of 5% with the EU on importing and exporting cars and 2.5% on components, then £1,202 will be added to the cost of production.
The report said it would make economic sense for some manufacturers to abandon British factories if 10% WTO tariffs were introduced. The cost of exporting 200,000 cars a year from the UK would be £920m after two years, which PA Consulting said would easily cover the cost of building a new plant in the EU.
The government has provided a £16.1m grant through the regional growth fund for LTC’s new factory. Clark said the facility, which will also house research and development, demonstrated that the UK was a “world leader in the development of new automotive technologies”.
He has pledged to put support for the development of electric vehicles at the heart of the government’s industrial strategy.
“Our iconic black cabs are famous across the world. The London Taxi Company’s impressive new factory and RD facility showcases the innovation that makes the UK a world leader in the development of new automotive technologies,” he said.
“Through our ambitious industrial strategy, we are committed to building on our strengths and taking advantage of the opportunities the new low-carbon economy provides.”
The Department for Transport aims to encourage taxi drivers to buy new electric vehicles with £64m in incentives. The money will be used to offer taxi drivers a £7,500 discount on the cost of an electric vehicle and pay for more charging points across the UK.
John Hayes, the transport minister, said: “This government is committed to improving air quality and reducing pollution in towns and cities, which is essential for people’s health and the environment.”
Unions welcomed the investment, particularly in light of LTC going into administration in 2013 before being bought by Geely.
Unite’s regional officer Peter Coulson said: “This a fantastic story of a company that was on its knees in 2013. Now thanks to the commitment of Geely’s top management and accompanying large-scale investment the iconic London taxi is set for its continued renaissance.
“Tribute should also be paid to the dedicated workforce who have worked hard and diligently to contribute to the current success.”
Signal of China’s growing importance in car industry
The new LTC plant is not just the first new car plant in the UK for a decade and the first to focus on making electric vehicles. It also represents the single biggest investment in the British automotive industry by a Chinese company.
Geely saved the maker of London’s black cabs from the brink of collapse in 2013. The company was founded by Li Shufu, who the business secretary described as “one of China’s great business leaders and therefore one of the world’s great business leaders”.
Li set up Geely in 1986 as a fridge manufacturer, but he has gone on to build a substantial car maker in China and buy western brands such as Volvo and LTC.
Representatives from the Chinese government were at the official opening of the new factory, and the presentation translated into Chinese. Chris Gubbey, LTC’s chief executive, described the facility as a “success story for the cooperation between the UK and China”.