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LONDON — Britain wants to become a powerhouse for electric car manufacturing — but Brexit is making that harder.
As the global race to build the vehicles of the future hots up, stalwarts like Jaguar Land Rover, Ford, VW and BMW are clamoring to compete with Elon Musk’s Tesla and a host of Chinese giants.
The U.K. hopes to win this “auto renaissance,” Investment Minister Gerry Grimstone, who heads the little-known Office for Investment connecting No.10 Downing Street with the trade and business departments, told POLITICO.
Grimstone’s task is to help Britain win at “one of the most globally competitive sports that there is” — attracting foreign investment. He eyes electric cars as a route to re-establishing the U.K. “as one of the leading auto manufacturers in the world.”
Yet one of the biggest obstacles to investment in the sector is the set of rules dictating how much of a product must be made inside Europe in order to qualify for lower tariffs when U.K. manufacturers trade with the rest of the EU.
It’s a post-Brexit snag some producers say they could do without.
Because most electric car batteries — at least the parts — are made further afield, it will be tough for manufacturers to keep their vehicles within the strict limits needed to make exporting to Europe competitive while at the same time driving up exports globally under the U.K.’s new trade deals.
The Brexit trade pact London signed with Brussels in 2021 sets limits on the proportion of electric vehicle components that can be made outside of Europe for manufacturers to benefit from tariff-free trade.
These limits will fall from 60 percent initially to 45 percent by 2027. Unless manufacturers comply with these limits, their cars could become prohibitively expensive and the investment simply won’t pay off for manufacturers.
Britain might be out of the EU, but it can’t escape this crucial trading relationship. European countries remain the biggest market for British car manufacturers, and 55 percent of cars manufactured in Britain ending up being exported to the EU.
Mike Hawes, chief executive of lobby group the Society of Motor Manufacturers and Traders (SMMT), said the U.K. needs to “transform a lot of its production “into electrified competence,” a process which won’t happen quickly and is “not easy.”
Whether Grimstone can get carmakers to build electric vehicles in Britain, Hawes said, “depends on whether the underlying conditions for investment are competitive.” China is currently number one in the world for EV manufacturing, with the U.S., Japan, and Korea all strong performers too. “So there is quite a lot of competition.”
Grimstone has already had one clear win.
On the night of June 30 last year, he celebrated early success in his bid to transform the industry with “a dinner up in Sunderland” hosted by senior representatives of Nissan before they and Chinese electric battery maker Envision announced their £1 billion stake in Sunderland electric vehicle production the following day.
Prime Minister Boris Johnson and Business Secretary Kwasi Kwarteng even turned up in Sunderland, a key political battleground in the North East of England, to celebrate.
For the deal to happen, three parties “needed to be brought to the finishing line simultaneously,” Grimstone recalled — Nissan, Envision and Sunderland City Council.
But the race to seal the deal started months earlier, with Grimstone heading up regular weekly meetings between the three, and “a tracker which said who had to do what to get this done.”
Flexing his deal-making muscles from his merchant banking days, Grimstone helped drive government grants and assistance, while Sunderland City Council finalized a micro grid and moving electricity pylons so that the factory could fit where it needed to.
“Traditionally, any one of those things can cause projects to fail,” Grimstone said. “What we haven’t traditionally been very good at in this country is clearing barriers to investment.”
With Nissan in the bag, Grimstone traveled up and down the country from Birmingham and Manchester to Glasgow and Teesside in a bid to launch that “auto Renaissance” and draw in more foreign investment.
In less than a year, the Office for Investment has helped attract some £5 billion worth of deals, including Ford’s £230 million Halewood investment, Stellantis’s £100 million stake at Vauxhall’s Ellesmere Port plant, more than £1.7 billion in private funding for Britishvolt and Bentley’s £2.5bn investment in Crewe.
The government might not like to talk about it, however, but one of the things standing in Grimstone’s way is Brexit.
Ford’s U.K. chair, Tim Slatter, said this week that threats of a trade war over British moves to tear up post-Brexit Northern Ireland trade arrangements threaten automotive investments.
Slides and briefing notes prepared for a meeting between Grimstone, the SMMT’s Hawes and senior representatives from a host of carmakers last May list Brexit as a key “competitiveness and cost” issue facing the industry along with COVID-19. The documents ere obtained by POLITICO through freedom of information law.
“I’m aware the sector continues to face headwinds as it recovers from COVID-19 and adjusts to the new trading arrangements with the EU,” Grimstone told participants at that meeting, according to the documents. “While the U.K. business environment is relatively competitive,” he said, citing the barriers, “I do not underestimate the challenge of landing these investments.”
A presentation given during the meeting contains a laundry list of “Brexit issues” including the U.K.-EU trade deal’s rules of origin, increased customs and border costs, the Northern Ireland protocol and freight delays.
The Brexit trade deal “just about works for us,” said Hawes. But “don’t get me wrong,” he adds, “it’s still time-sensitive.”
It’s not clear that U.K. manufacturers can phase out foreign components in their batteries to meet the European timeframes either.
“Ultimately all electric vehicles sold in Europe will have to have a European-made battery,” said Hawes. The Brexit trade deal will tighten British electric battery supply chains within Europe.
Further complicating matters, he says, is that “when the U.K. comes to trade with other countries, then you’ve got to agree rules of origin” all over again.
What about the rest of the world?
Britain is currently in trade talks with countries like India, Mexico, six Gulf nations and the 11-nation CPTPP trade bloc which have to accept British supply chains in Europe. Each of those deals will set their own rules for where components can be produced.
“When you’re doing a deal with an automotive-producing nation,” said Hawes, “they’re used to high levels” of local content — usually 55 percent of the vehicle’s production for their own domestic industry. “So that’ll be their starting point” in trade talks, he said.
Yet this “is too high for EVs to clear,” Sam Lowe of consultancy Flint Global has warned. “This is due to the battery of an EV accounting for a significant percentage of the final value of an electric vehicle (35 to 45 percent), and invariably being sourced from outside the EU (usually Asia).”
Mexico’s trade chief Tatiana Clouthier has already confirmed that the interests of domestic producers will be a key part of her country’s calculation in trade talks when it comes to EVs.
Mexico specializes in developing parts. “We integrate them [into the vehicles] not only in Mexico, but we sell parts to almost everywhere in the world,” she told POLITICO in May as the U.K. launched Mexico trade talks. “And that’s what we are looking for.”
India and the tens of millions of people that make up its growing middle class also offer a vast market for U.K. carmakers.
Yet what Indian Prime Minister Narendra Modi wants most is to be able to manufacture cars in India under his Make in India policy, Suresh Surana, founder of the consultancy RSM India, explained. He’s worked closely with Indian auto manufacturer Tata Group, which owns Jaguar Land Rover, currently Britain’s top car maker.
India already imposes 150 percent tariffs on the import of a completed electric car and steep levies on components too. It’s kept Elon Musk’s Tesla out of the country.
Indian negotiators will be resistant to lowering tariffs on both finished electric vehicles and components in trade talks, said a former British diplomat who was posted there for nearly a decade. “Make in India is all about that,” they said.
There’s an opportunity, said Surana, for some parts to be manufactured in both the U.K. and India and swapped between the two to make a finished vehicle, along with the transfer of intellectual property. “Over-dependency on China is becoming very clear,” he said, and “India can be used as a regional hub for component manufacturing and also, of course, for the local market in India.”
British manufacturers “may want to set up their manufacturing in India using British know-how, British components,” said Investment Minister Grimstone, pointing to Tata Motors, the Land Rover owners, as a firm that would stand to benefit.
“A trade deal which allows freedom of flow of that is really important,” he adds.
Hoping for the next Tesla
Yet Jaguar Land Rover is already looking to manufacture a new range of EVs in Slovakia. Britain also lost out to Berlin in efforts to woo Musk to set up a Tesla factory.
“If they’re building a very large factory in Berlin, it’s very unlikely they want to build another very large factory in the U.K. — it’s just the dynamics of it,” Grimstone said.
“Tesla has competitors,” he points out. “We’re always looking at the potential of new entrants coming into the market.” Yet newcomers like Lucid and Rivian don’t have any revenue, just the promise of success.
Manchester and Birmingham are both vying to attract more investment. Andy Street, the Conservative Mayor for the West Midlands, has gone as far as working with landowners in a “local joint venture,” Grimstone said, to prepare a site for an electric vehicle gigafactory.
“What we’re trying to do is to move that on as rapidly as we can by doing the planning application in advance,” he explained, in the hopes of attracting a large industry that once “provided for the majority of the exports for this region.”
Are there more investments like Nissan’s coming? “I hope so,” said Hawes. “We need more.”
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Top European planemaker Airbus has advanced technology sharing and manufacturing agreements with entities linked to China’s state-run military apparatus, a new report shows.
The findings will beg questions over how long Europe’s aviation champion can continue to secure its strong market position in China with such local partnerships, when faced with an increasingly tense strategic relationship between Beijing and the West and growing calls for less dependence on Chinese manufacturing.
While Boeing’s sales of aircraft in China were hammered by the U.S.-China trade war under former President Donald Trump, Airbus has been far more successful in the country. Since it entered the Chinese market in the mid-1980s, Airbus has perfected the art of localization like few other multinationals. It chose the city of Tianjin for its only non-European final assembly line for wide-body A330s and picked a Communist Party member as chief executive, according to a new report by Horizon Advisory, a U.S.-based consultancy.
While many elements of Airbus’s strong relationship with China are already well known, researchers Emily de la Bruyère and Nathan Picarsic scoured open source material, including Chinese sources, to focus more squarely on some of the interactions with entities such as AVIC, the state-owned aviation and defense conglomerate, and the issue of industrial dependencies.
“Airbus’s ties to the Chinese market appear to carry outsize risk,” Horizon Advisory says in its report, which has been shared in advance with POLITICO. “Airbus-China engagement entails significant ties to China’s military and military-civil fusion apparatus, including in the form of supply dependencies, technology sharing, and research and development cooperation,” it adds.
Airbus did not respond to requests for comment when asked specifically about the activities in China that the report raises as a concern. On its web site, Airbus notes that its China operations are only one element of a big industrial program in the Asia-Pacific region, saying that it has partnerships “with more than 600 firms in 15 countries supplying parts for Airbus aircraft.”
Horizon Advisory’s report, funded independently by the organization itself, is likely to make for an uneasy read for many EU politicians and lawmakers who have grown increasingly skeptical of the traditional way of doing business with China.
China’s aviation sector grew out of the People’s Liberation Army Air Force and was never fully privatized or separated from its military roots. In recent years, President Xi Jinping has called for “civil-military” fusion and introduced numerous laws and regulations that require a very broad range of companies — especially those in strategic industries and including joint ventures with international companies — to cooperate with the country’s military and intelligence agencies.
“Airbus has learned a lesson in the hard way,” said a senior Western defence official, speaking on condition of anonymity due to the sensitivity of the issue. “It’s been a concern for some governments … but before the recent geopolitics, everyone was enthusiastic about the China market.”
Commenting on the general business environment, Bart Groothuis, a Dutch member of the European Parliament and a defense expert, said: “I believe we are still not doing enough to keep our intellectual property safe while cooperating with China … Nor are we fully aware to what extent our cooperation with Chinese civilian military organisations can lead to advancing the Chinese military.”
According to the report, Airbus “operationalizes its presence in China through a set of at least 10 legal entities, five of which are joint ventures with Chinese state-owned, military-tied players.”
At the core of this is AVIC, or Aviation Industry Corporation of China. Airbus holds a 5 percent share of AviChina, the Hong Kong-listed arm of AVIC, as a strategic investor. It continues to hold stakes in the company even though seven other AVIC subsidiaries were designated as “military end users” in 2020 by the U.S. Commerce Department under Trump’s administration, which called on exporters to step up screening. The EU has no similar regulations against AVIC or its subordinate companies.
According to Chinese media reports, the Airbus-AVIC joint venture is responsible for 5 percent of the airframe of one of Airbus’ newest models, the A350XWB. All of Airbus’ A320 wings assembled in Tianjin will be manufactured by AVIC subsidiary Xian Aircraft Company (XAC), which also develops and produces the Y-20 military transport aircraft used by the Chinese military.
“Throughout 20-odd years of partnership with Airbus on the A320 family, XAC has fully grasped the whole set of manufacturing technology of A320 wing design, from component manufacturing, assembly, final assembly to integrated delivery,” XAC Deputy General Manager Han Xiaojun said last month. “This marks yet another critical step supporting China’s strategic planning toward a transport superpower, aviation superpower and manufacturing superpower.”
The report pointed out that, in several cases, Airbus had become dependent on Chinese companies — including military linked ones — as sole, or almost sole, suppliers of key parts such as certain types of rudder, elevator and door.
Future projects in China will include even more sensitive areas. “We are also considering increased integrated cooperation with China in new technology areas like big data, artificial intelligence and new energy,” George Xu, CEO of Airbus China, wrote in an article earlier this year “This is why we chose Shenzhen to set up the world’s second Airbus innovation center, the only one outside the United States.”
There is no indication that any of Airbus’ technology has ended up in the possession of the Chinese military. Airbus did not respond to POLITICO’s question on whether sensitive technologies had reached the Chinese military.
On the other hand, China’s homegrown aircraft manufacturer, Commercial Aircraft Corp. of China, or Comac, has been making inroads in recent years. Last month, Comac completed the first test flight of the first C919 jetliner to be delivered. Already, Airbus considers Comac as a long-term competitor.
“Comac is developing the 919 that will be a single-aisle product entering into the market probably [this] year or the year later. It will start slowly, probably reaching at the beginning only the Chinese airlines. But we believe this will progressively become a decent player,” Guillaume Faury, chief executive of Airbus said. “So we will grow probably from a duopoly to a triopoly, at least on the single-aisle [planes] by the end of the decade.”
NORCROSS, Ga.–(BUSINESS WIRE)–Jun 6, 2022–
Accenture (NYSE: ACN) has acquired Advocate Networks, LLC, a leading technology consultancy and managed services provider of Technology Business Management (TBM) solutions that help organizations create business value, achieve cost savings and modernize their technology platforms. Terms of the transaction were not disclosed.
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Accenture acquired Advocate Networks, technology consultancy and managed services provider of Technology Business Management solutions. (Photo: Business Wire)
Headquartered in Norcross, Georgia, Advocate’s team of more than 85 professionals is joining Accenture’s Technology Strategy & Advisory practice, bringing capabilities for helping clients define, architect and measure value from their digital and cloud transformations. Advocate has deep technology expertise and a full suite of services that help organizations align technology investments with business goals and uncover savings to reinvest in initiatives that drive growth and transformation.
“Organizations expect their technology investments to fuel innovation and transform business operations and are increasingly adopting TBM principles to optimize spend and deliver and demonstrate immediate strategic business value,” said Keith Boone, Accenture’s North America Technology Strategy & Advisory lead. “With the powerful combination of Accenture and Advocate, we will offer a multitude of industry-leading resources and capabilities to help our clients measure the value of technology initiatives in a clear, quantifiable manner.”
Advocate’s full suite of TBM services, from strategic advisory to TBM-as-a-service (TBMaaS), complement Accenture’s cloud and digital transformation services and end-to-end capabilities for TBM and FinOps. Advocate also brings accelerators for industry-leading tools and dashboards for IT value management and services that will enhance insights provided by Accenture’s proprietary assets, such as Accenture Momentum, myConcerto, myDiagnostic and myNav, with additional TBM analytics.
“For more than two decades, Advocate’s enterprise clients have relied on our dedicated team of TBM advisors, industry thought leaders and technology specialists to improve efficiency and uncover savings for new investments,” said Tim Wise, co-founder and co-CEO of Advocate. “We share Accenture Technology Strategy & Advisory’s purpose for helping clients architect and realize exceptional business value from technology and are excited to bring our combined capabilities to both new and existing customers.”
Accenture’s Technology Strategy & Advisory practice works with clients to define their technology visions and build the necessary roadmaps and execution plans to create sustainable value from technology investments.
Accenture is a global professional services company with leading capabilities in digital, cloud and security. Combining unmatched experience and specialized skills across more than 40 industries, we offer Strategy and Consulting, Technology and Operations services and Accenture Song—all powered by the world’s largest network of Advanced Technology and Intelligent Operations centers. Our 699,000 people deliver on the promise of technology and human ingenuity every day, serving clients in more than 120 countries. We embrace the power of change to create value and shared success for our clients, people, shareholders, partners and communities. Visit us at accenture.com.
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