There was hardly a cloud in the sky over Team Valley Trading Estate on Wednesday as a clutch of representatives from the northeast’s motor industry filed into the glass-fronted offices of an engineering firm in Gateshead. From producing trims to exhausts, in-car displays and electric vehicle (EV) charging, these suppliers cover every aspect of the carmaking process. They are inextricably linked to the Japanese powerhouse that dominates much of the economic landscape south of the River Tyne: Nissan.
The suppliers agreed to meet The Sunday Times on condition of anonymity. Many of their businesses are dependent on the gargantuan plant in Sunderland, just a 15-minute drive west along the A1231. Venting their frustrations in public might not be good for business.
“There was a time when Nissan led the way in the production of electric vehicles at Sunderland, but now they seemed to have trashed that legacy,” said one.
The symbiosis between Nissan and the local economy has been all-encompassing ever since the first car, a white Bluebird, rolled off the ramps in 1986. More than 11 million cars have been produced since, equivalent to one every two minutes — every hour of every day.
The Nissan plant in Sunderland employs 6,000 people directly and supports a further 30,000 jobs in the supply chain
NISSAN
The 6,000 people who work at the plant are, in many ways, just the tip of the iceberg. The Sunderland factory supports a further 30,000 UK jobs in the supply chain. Five million parts arrive at the plant daily. Small wonder, then, that over the years governments from both sides of the political divide have doled out billions of pounds in grants to keep the Japanese giant in situ.
Nissan was a pioneer with the Leaf, the world’s first mass-produced electric car. From 2013 onwards, Sunderland spearheaded European production of the model. The plant’s annual production, which peaked at more than 500,000 cars in 2016, is languishing at little more than half of that. Just 284,265 vehicles rolled off the ramps in 2024.
“Do you know how many electric vehicles Nissan has produced in Sunderland over the last 18 months?” asked one supplier. “Zero,” he said, indignantly.
To be fair, things may soon be looking up. Production of the third iteration of the Leaf is scheduled to begin in just a week’s time. Kim McGuinness, North East mayor, said: “I am confident that we will build a firm future for car making in the northeast starting with Nissan’s new Leaf model coming off the production line in Sunderland.” But it nevertheless comes against the backdrop of a wider malaise afflicting Britain’s automotive industry.
Annual car production in the UK has been in decline since the 1950s, when only the US produced more vehicles globally. The reduction has been more stark in recent years, falling from 1.8 million in 2016 to little more than 700,000 currently.
Even the staunchest Brexiteer would find it hard to deny that leaving the EU had a negative impact on UK car manufacturing. But the real drop-off has been more recent, with production almost halving since 2019.
From high labour and energy costs to an influx of cheaper Chinese EVs — not to mention the recent global shutdown of Jaguar Land Rover, the country’s biggest carmaker — the explanation for the decline of Britain’s car industry is multi-faceted.
Some around the table believe what little government support there is should be directed towards the automotive heartlands of the West Midlands rather than the northeast. “It really grinds my gears that the West Midlands gets all the help and we are the last to be thought of,” said one attendee.
Time and again, however, it is the UK’s handling of the green agenda that is principally to blame for the sector’s downturn in fortunes, those in the industry argue.
The global car industry is grappling with the switch from cars powered by internal combustion engines (ICE) to electric vehicles.
The UK has chosen to implement a zero-emission vehicle (ZEV) sales mandate that puts the onus on manufacturers to drive the change. They must ensure that ZEVs make up a percentage of overall sales. The mandate began at 22 per cent in 2024, climbing to 28 per cent this year and rising each year to 80 per cent by 2030, when sales of new petrol or diesel cars will be banned. Hybrids will be allowed until 2035.
If carmakers miss the target, the government fines them £12,000 for every car under the annual threshold. Such is the scale of the per-car penalty, it makes more economic sense for the manufacturers to sell off stock at steep discounts. Markdowns of EVs to meet the sales mandate last year cost carmakers an estimated £4 billion — a clear sign that public demand is not at the levels the state is mandating.
“I know plenty of car manufacturer CEOs who are sitting in their offices and the only thing they’re doing is working out how to avoid fines,” said Tim Tozer, former Vauxhall UK chairman.
The other way of meeting the target is for manufacturers to reduce the overall production of both EVs and ICE cars to ensure supply and demand for SEVs is balanced. Many people in the industry say this tactic is why UK car production levels are at 70-year lows.
“EV sales quotas simply act as a disincentive to increase production,” said one of the suppliers around the table in Gateshead.
Beyond the ZEV sales mandate itself, many believe that the industry’s problems have been exacerbated by the mixed messaging of successive governments.
As prime minister, Rishi Sunak pushed back the ban on new petrol and diesel cars to 2035
IAN FORSYTH/PA
In 2021, Boris Johnson brought in a ban on the sale of new petrol or diesel cars for 2030, only for this to be pushed back to 2035 by his successor Rishi Sunak in 2023. Last year Sir Keir Starmer brought the deadline forward again to 2030, and added a further disincentive last month with the announcement of an EV pay-per-mile scheme starting in 2028 that to many looks like a penalty for making the switch.
The Office for Budget Responsibility (OBR) predicted this would lead to 440,000 fewer EVs being purchased over the next five years. Enhanced sales grants of up to £3,750 per car would partially offset this, increasing the number of sales by 130,000. The OBR later upgraded the offset estimate to 320,000 cars. Car bosses are extremely sceptical about these numbers.
The EU, meanwhile, is shifting in the opposite direction. Brussels is outlawing the sale of new petrol and diesel cars from 2035 and has a laxer quota regime compared with the UK. Now the EU is poised to go one step further.
Tozer said: “I have it on good authority that the EU is going to add five years onto the current 2035 to make the date 2040. Which would mean that from Jan 1, 2040, all new vehicles would need to be pure electric.
“The Germans have been arguing very proactively for it, and the French as well … It wouldn’t surprise me if it was the Christmas present for the industry.”
He continued: “Certainly in Europe, change is going to happen. And the UK, in my opinion, would be well advised to get on and follow it.”
Andy Palmer, the former chief executive of Aston Martin and the man nicknamed the “Godfather of EVs” for leading the Leaf project while chief operating officer at Nissan, says that alignment with EU green car targets would be appealing because it would allow manufacturers to “give the customers what they want”, rather than being forced to sell an artificially high proportion of ZEVs.
“The alternative is that you stick to your position, make the UK a leader in EV adoption and use that to bring manufacturing back,” he said. “At the moment we’re getting the worst of both worlds, right? We’re getting the mandate being imposed and no manufacturing. That’s just stupid.”
Palmer explains that there is the opportunity to replicate Margaret Thatcher’s trade missions to Japan in the late 1970s and 1980s. This resulted not only in Nissan building a car factory in the UK — and making it the company’s European base — but Honda and Toyota constructing large plants of their own in Britain.
“She only needed to land one or two of them, and she landed all three,” he said.
For Japan, substitute China — the unrivalled leader in EV production. Britain should “go and bang on the doors of the Chinese manufacturers”, offering them beneficial trade terms in return for building factories in Britain, he said. “I’m hoping that Starmer going to China in January will be a part of that.”
Such a move would be hugely controversial, not least on security grounds. But it might be the UK’s only choice if it wants to have an automotive sector of scale.
Hakan Samuelsson, chief executive officer of Volvo, believes the move to electric cars should not be delayed
PATRICK T FALLON/BLOOMBERG VIA GETTY IMAGES
Sweden is moving in this direction. Last week Michael Lohscheller, the chief executive of Polestar, Europe’s only all-electric car manufacturer, said the EU must stick to a 2035 petrol car ban. “If Europe doesn’t take the lead in this transformation, rest assured, other countries will do it for us.” he said.
Hakan Samuelsson, the chief executive of Volvo, agrees: “I don’t see the logic in slowing down.”
For now, the alternative in the UK does not look good. And the government is adamant, publicly at least, that it will not be changing the ZEV mandate.
On the outskirts of Oxford, a £600 million investment by BMW in its Mini assembly plant was paused due to “multiple uncertainties” facing the automotive industry — an explanation that many interpreted as a euphemism for a lack of demand for EVs.
Back in Sunderland, some suppliers are now trying to reduce their dependency on Nissan.
“We are expanding into the defence sector to compensate for the downturn and lack of demand,” said one. “It feels like the UK automotive sector has dropped like a stone. Nissan is making roughly half the number of cars it was at its peak — and that has an equivalent impact on us. At our peak we were employing about 500 people in the northeast. Now it’s nearer 230.”
