Why the UK needs financial support for electric vehicle battery startups

Back in the fog of time – to be precise 2017 – then-Business Secretary Greg Clark announced ambitious plans to take Britain to the forefront of the global electric car battery manufacturing industry. At the heart of his initiative was the establishment of the Faraday Challenge – a series of government-sponsored competitions designed primarily for research and development. There was good news to start working on this case.

So, how is it going for five years? Well, according to a report published this week by the Green Finance Institute, there is still a window of opportunity to become a significant player in this UK market. But – and this is a very big but – it will not happen without money.

At the moment, things stand that the EV battery industry is worth about $ 41 billion and has about 85 percent share of the Chinese market. According to the GFI report, the market value will increase from $ 116 billion to $ 278 billion by 2030 and that expansion will make room for other countries to build their battery industries. UK shares could be 24 billion.

Scaling up startup

The report suggests that the UK could build capacity in one of two ways. Either large manufacturers will be persuaded to set up factories with local supply chains. Or the UK startup will scale up and build a domestic industry. Equally, of course, it could be a combination of the two.

But here’s the thing. Money is the key to developing and scaling startups. Without capital, opportunities can be missed. “There’s a window of opportunity but it’s closing fast,” said Lauren Pama, program director at the Green Finance Institute. “Through this report, we want to raise investor awareness about the need to invest in the battery supply chain.”

You may be forgiven for thinking this is a done deal. China’s current dominance in the market is likely to continue, and players in major automotive industries elsewhere in the world are making their own investments. So is the report simply creating a debate around a market that is well along the road already carved for all purposes and purposes?

Pamma insisted there was still a lot to play. In the case of the United Kingdom, he said: “We are not competing with China for market share. But we can capture some part of the market. ”

An Introduction to Entrepreneurs

But will it benefit startup companies that are currently developing the technology or will the UK’s battery sector be dominated by corporate business? Pamma said the entrepreneurial business will have a role to play. “There are a lot of opportunities for SMEs – such as anode, cathode manufacturing and electrolyte supply,” he says.

But there is a caveat. “It’s a very capital intensive business,” he said, adding that it requires a lot of money, which VCs have traditionally been reluctant to do. Equally – and in line with lots of hardware-based Greentech projects – the market period is even longer. Again a hurdle for VCs.

Capital attraction

So what can be done to improve cash flow? OK, the government is pump-priming the battery sector মাধ্যমে 318 million through the aforementioned Faraday Challenge and has a £ 1 billion Advanced Propulsion Center funded. More cash is being sent through the UK Battery Industrialization Center, which was set up to help develop the product.

But Pamma says more needs to be done to encourage equity investment. To date, this sector does not seem to be a cash magnet and only partly because of the amount involved. “Investors also lack knowledge,” Pama said “And there’s a time factor. Small startups probably don’t have time to pitch up to 40 potential investors.”

Pamma suggests that the focus of government support could shift from grants to investment stimulus or risk-free measures. You can use the funds to provide guarantees, ”he says. “For example, credit enhancement or revenue guarantee.”

It will, of course, depend on a change in government thinking. GFI – seed fund as it is by state – talks with the Ministry of Treasury and Business as well as the Infrastructure Bank. To date there is access but there is no specific policy response to the Institute’s advice.

Why is this important? Of course, having a domestic battery manufacturing base in the UK would benefit economically. The UK also supports science and travels from the R&D lab to the production line.