BMW Plugs £600 Million Into UK Plant to Make Electric Minis

BMW AG will invest in the 110-year-old plant where the Mini brand originated to make electric models, tapping the UK government for support in the fight to prop up the country’s car industry.

(Bloomberg) — BMW AG will invest in the 110-year-old plant where the Mini brand originated to make electric models, tapping the UK government for support in the fight to prop up the country’s car industry.

The more than £600 million ($751 million) outlay averts what would have been a disaster for the UK, where car production slumped last year to the lowest since 1956. The Oxford factory employing more than 3,400 people was dealt a setback 11 months ago when BMW announced it was shifting electric Mini output to China.

Any fears that the plant may not continue into the EV age were put to rest Monday. BMW announced that it will make models powered by combustion engines until 2026, when it will add production of next-generation electric Mini Cooper hatchbacks and Aceman crossovers. From 2030 onward, the factory will shift to all-EV production.

While BMW’s moves add to recent momentum for the UK car sector, the country isn’t keeping pace with nations taking more aggressive approaches to industrial policy. The more than £6 billion of investment announced in Britain’s auto industry since 2020 pales in comparison to the $72 billion that companies have earmarked for North America since the US passed the Inflation Reduction Act last year.

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Business Secretary Kemi Badenoch hailed the announcement as proof that the government’s plan for the car sector is working. Stellantis NV started production of electric vans at its factory in Ellesmere Port last week, while Jaguar Land Rover owner Tata Group announced plans in July for a £4 billion UK battery plant that will start supplying cells in 2026.

Badenoch declined to say how much money the government will kick in to support BMW’s investment. The Financial Times reported that the project will be backed with about £75 million of taxpayer funds, citing unidentified people familiar with the matter.

“We do provide some subsidy — a very light subsidy — in the auto industry because it faces so much difficulty, and some of that is regulatory,” Badenoch said. “If we’re asking manufacturers to transition to net zero, that creates additional costs, so we do have to factor that in. As much as I would love it to be so, the global auto industry is not a pure free-trade market.”

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BMW started building electric Mini hatchbacks in Oxford in 2019 alongside combustion cars. At its hometown auto show in Munich last week, the automaker unveiled the next-generation Mini Cooper built off a dedicated EV platform co-developed with Chinese partner Great Wall Motor Co.

Had BMW opted to keep electric Mini production limited to China, it would have been a serious blow to the UK, where car production has fallen by half since the 2016 Brexit referendum. The Society of Motor Manufacturers and Traders — the industry’s lobby group — has said high energy costs are the biggest obstacle to the sector mounting a comeback.

“Energy cost is something where you need to be very careful — for our manufacturing, but even more for the battery manufacturing,” Milan Nedeljković, BMW’s production chief, told reporters at the Oxford plant. “And we are not competitive — in Europe, in UK.”

BMW will nonetheless bolster its presence in the UK, despite those challenges and ongoing regulatory and trade uncertainty.

Prime Minister Rishi Sunak’s government has been trying to delay Brexit rules requiring EVs shipped back and forth between the UK and European Union to have enough local content to avoid 10% tariffs. Automakers expect to come up short of these rules of origin — which take effect next year and will be stricter in 2027 — because much of the battery supply chain is still concentrated in China.

“The point which we make, and which auto manufacturers are also making, is that this will only benefit Chinese companies if we are putting tariffs on each other’s products,” Badenoch said.

The other headache for the industry has been the dearth of details regarding the UK’s zero-emission vehicle mandate, due to take effect in January. The government is still analyzing feedback elicited from a consultation that ended in May, and carmakers are sweating their ability to meet whatever targets are set for next year, given the cost-of-living crisis, high energy prices, reduced government incentives and slow installation of charging stations.

While battery-electric vehicles have been on the rise, with registrations soaring 72% last month, overall sales growth has been driven almost entirely by fleets and businesses.

(Updates with support from government in the sixth paragraph.)

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