Britain’s EV push will cost billions, but the prize could be worth much more

This could be £500m. It could be £1bn. It could even be £2bn. It’s not clear how much the government agreed to pay the Indian conglomerate Tata last week for a battery plant in Somerset, instead of Lyon or Stuttgart.

One thing is certain, though. The amount of money was huge, especially at a moment when the government’s finances were stretched to their limit.

It was probably not worth it for the batteries or even the automobile industry. It is too late for Britain to become a major player in the electric vehicle industry with the huge subsidies that the US, China, and the EU pour into it. It could pay off in a different way.

The long-delayed free trade agreement with India could be finally achieved. India’s prime minister, Narendra Modi is not the most liberal leader in the world, nor does his country have a free trade agreement with India.

It is still a potential export partner that could be exciting for the UK. For a billion pounds we should get the Free Trade Deal. If it’s not signed soon, then ministers will have serious questions to answer.

Tata got its money after months of thinly-veiled threats. It was announced on Thursday that Jaguar Land Rover will build a new gigafactory, which would employ 4,000 people and produce half of the batteries needed by the British auto industry to compete in the electric vehicle race.

The total cost will be PS4bn, a large portion of which is coming from the government. It will be the UK’s first substantial battery factory to compete with factories in France and Germany.

Tata and JLR are at the helm of this project, so it will at least be completed, which is more that can be said about previous attempts to build batteries in the UK.

It is difficult to imagine that this will be sufficient to make the UK a major EV player. The US is putting unlimited money into the industry to take the lead. BYD and other Chinese manufacturers have a huge home market, so they can crush any opposition. And the EU has started to invest heavily in building its own factories.

The industry is becoming the most difficult in the world and a major drain on government funds. Even if the UK is able to create a niche for luxury cars, it will be difficult.

But there is another prize that could add up. The negotiations for a free-trade agreement with India began in 2021. Last week’s latest round reported some progress, but there is still much work to do on services and tariffs.

A trade agreement with India would be the best deal for the UK at this time. As long as Joe Biden is in the White House the United States will not be on the table. With the recent agreement signed by India to join CPTPP (the grouping of Pacific Nations that includes Japan Australia Malaysia and Vietnam), India is now the most attractive trading partner.

There are certainly problems. Modi’s commitment is not inspiring. It remains a closed and protected economy where connections are more important than ability.

The UK does not wish to appear desperate or too desperate to sign anything. The sheer size of the Indian marketplace is undeniable. UN estimates show that India overtook China as the most populous nation in April.

It may also expand more rapidly, with growth predicted at 6pc and China slowing.

Goldman Sachs recently predicted that it would become the second largest economy in the world by 2075. It will surpass the US and be just behind China. (And with a more than twice the output of euro-zone). The UK will have long-standing relationships with this market. It is a large and prosperous one.

If the UK is able to combine its membership in the CPTPP and a trade agreement with India, it will complete the pivot towards Asia and Pacific and position itself as a link between Asia, Europe, and North America.

It is a much better position than the hard-core Remainers predicted, who argued that Britain would become irrelevant outside of the EU.

Now, the key is to close the deal. India has no trade agreement with either the EU or the US. Both are unlikely to sign one anytime soon.

There are many barriers to remove in industries where the UK enjoys a competitive advantage, including finance, legal and professional services in the media, publishing, education and life sciences.

There are still many opportunities, and British companies are well-versed in the Indian market, as are Indians. It may seem expensive to spend a billion pounds on a Somerset battery plant. If it helps the UK secure a free-trade agreement with India and a pair Asia-Pacific agreements then it is worth it.