The Government has put electric vehicles and batteries at the heart of its Modern Industrial Strategy, with an explicit aim to lift UK output to more than 1.3 million cars and commercial vehicles by 2035 and to anchor gigafactories and their supply chains on British soil.
The Advanced Manufacturing Sector Plan, published as part of the strategy, couples long‑term funding and pro‑innovation regulation with cheaper energy and place‑based cluster building—an attempt to convert the UK’s strong R&D base into scaled production at pace.
At the core is DRIVE35, a new offer for automotive investors that pledges £2 billion in capital and R&D funding to 2030, plus an extra £500 million for R&D, to accelerate zero‑emission and software‑defined vehicles, battery integration and vehicle‑to‑grid tech. Ministers want the programme to leverage at least £6.6 billion of private investment, knitting together grants with the National Wealth Fund’s tools and other public finance institutions to crowd in larger cheques for capital‑intensive projects.
A bigger, clearer runway for carmakers
Alongside DRIVE35, the paper confirms reforms to the Zero Emission Vehicle (ZEV) Mandate designed to give manufacturers greater compliance flexibility. Government has also confirmed sales of full and plug‑in hybrids until 2035, which it argues will smooth the production shift for OEMs and the purchasing journey for consumers.
On infrastructure, the plan cites more than 80,000 public charge points installed by June 2025, a further £400 million to accelerate rollout, and £1.4 billion to support EV uptake, including for vans and HGVs. Generous capital allowances and Benefit‑in‑Kind incentives remain part of the toolkit.
For advanced driver assistance and self‑driving, the Automated Vehicles Act 2024 is the regulatory foundation. The Government will implement the Act in full by 2027, enable commercial pilots from spring 2026, and extend the Connected and Automated Mobility (CAM) Pathfinder with £150 million to 2030—framed as a route to make the UK the first European market for self‑driving services at scale. A targeted export support programme will help CAM companies win work in the Middle East, while a parallel automotive export push prioritises North America, Japan, China, India and Western Europe.
Gigafactories and the battery backbone
On batteries, the strategy is unambiguous: the UK must build a resilient, end‑to‑end industry spanning raw materials, cells, packs, reuse and recycling. The Battery Innovation Programme (the re‑branded Faraday Battery Challenge) is funded at £452 million to 2030 to push technologies from lab to factory and to fund safety research and industrial skills. The programme has already supported 118 high‑tech projects, the majority SME‑led, and has catalysed significant private co‑investment. Separately, £12 million via the High Value Manufacturing Catapult is enabling the synthesis and scale‑up of novel active materials and solid‑state electrolytes, a sign that policymakers see materials science as strategic to securing supply and differentiation.
The plan also looks downstream: from 2027, EV and large industrial batteries sold into the EU will require a unique “battery passport”, and from 2031 they must meet recycled‑content targets for lithium, nickel, cobalt and lead. While these are EU requirements, the UK intends to use them as a competitive spur—by growing domestic reuse, recycling and end‑of‑life capabilities (a 2024 baseline turnover of £560 million is the starting point) and by considering UK battery passports to smooth trade and enhance traceability. A Circular Economy Taskforce will shape the policy mix, with proposals for a national strategy due autumn 2025.
Battery storage is pulled explicitly into the clean power mission. The Clean Power 2030 Action Plan foresees 23–27 GW of grid‑scale batteries by 2030, positioning energy storage not just as an enabler of renewables but as a domestic manufacturing opportunity in its own right. For carmakers and cell producers, that signals a more bankable market for stationary storage alongside automotive demand.
Lower energy costs and faster connections
For both EV assembly plants and gigafactories, energy price competitiveness has been a long‑running sore. From 2027, the British Industrial Competitiveness Scheme will cut electricity costs by around £35–40/MWh to 2030 for electricity‑intensive industries, with exemptions from key levies.
The British Industry Supercharger raises network‑charge compensation from 60% to 90% for eligible firms from 2026, and the Energy Intensive Industries Compensation Scheme continues, with a policy review slated ahead of the UK CBAM’s arrival in 2027.
To speed power access, a Connections Accelerator Service will triage strategically important projects and help them to the front of the queue; ministers will also consult on expanding the Corporate PPA market to provide long‑term price certainty. A revised Hydrogen Strategy is due in 2025, signalling support for hydrogen’s role in industrial processes and, in time, heavy transport.
Finance that pulls through to production
The strategy leans hard on the UK’s public‑finance machinery. UK Export Finance now has £80 billion of capacity and has created a new loan guarantee for UK suppliers of critical‑minerals products into export chains. A recent example—up to £680 million in finance guarantees for the AESC gigafactory—is held up as a model for de‑risking large projects.
The National Wealth Fund sits behind the strategy with £27.8 billion, and—crucially for EVs—has committed to deploy significant capital across the vehicle supply chain, including an intent to put at least £5.8 billion into five areas such as gigafactories and green steel.
The British Business Bank will add £4 billion of Industrial Strategy Growth Capital, including the ability to write £40–£60 million equity tickets into capital‑intensive scale‑ups.
Internationally, the trade agenda is framed around resilience and market access. The UK‑US economic deal would cut tariffs from 27.5% to 10% on a quota of 100,000 UK vehicle exports, while the UK‑India FTA is expected to save around £400 million a year for producers across several sectors. The Government says it remains in dialogue with manufacturers on rules of origin under the UK‑EU Trade and Cooperation Agreement to ensure electrified vehicles and batteries can continue to trade smoothly with the EU.
Clusters: where the rubber meets the road
Place policy runs throughout. The plan spotlights a spine of automotive and battery capability from the North East to the West Midlands, with the West Midlands and North East named as pilot regions for a fully integrated EV supply‑chain cluster.
The intention is to create a blueprint that can be replicated in other regions. Each Investment Zone gets £160 million over 10 years, and Freeports remain in play—mechanisms that local leaders can bend towards paint shops, pack lines and cathode materials, not just final assembly. In the background are specific projects: the Agratas gigafactory in Somerset, expected to create up to 4,000 jobs, shows the scale of bets now landing.
The plan also nods to the wider ecosystem—semiconductors, glass, carbon fibre, chemicals and critical minerals—with a Critical Minerals Strategy due in 2025, a Steel Strategy in train, and support for composite and glass R&D (think Glass Futures and the National Composites Centre). For EVs and batteries, shoring up these inputs is a buffer against future shocks and a route to higher domestic content.
What this means for boards and founders
For OEMs, tier‑ones and fast‑growing scale‑ups, the signal is threefold:
First, energy cost relief is material. If delivered cleanly, the British Industrial Competitiveness Scheme and Supercharger narrow a structural gap that has hampered plant economics for years. That could be decisive for siting decisions on new cell lines, pack assembly and high‑energy processes such as cathode and anode production.
Second, the financing architecture is more muscular. Between DRIVE35, the Battery Innovation Programme, the National Wealth Fund, the British Business Bank and UKEF, there is a clearer pathway from prototype to pilot line to full commercial build‑out. The onus is now on firms to present investible projects that meet the strategy’s tests on resilience, productivity and regional impact. The accountability framework and timeline on page 66—marking, for example, DRIVE35 competition launches in 2025 and full AV Act implementation by 2027—gives a rhythm to plan against.
Third, compliance and circularity are moving from “nice‑to‑have” to market access. Battery passports and recycled content thresholds will increasingly shape upstream design, sourcing and end‑of‑life models. Companies that can close loops—through reuse, second‑life and advanced recycling—will be better placed to win tenders and de‑risk trade with the EU.
Execution risks—and the watch‑list
Delivery will decide whether these ambitions become metal on the line. Four risks stand out:
Grid and planning friction
The Connections Accelerator Service is a welcome fix, but the scale of BESS and gigafactory demand means grid reinforcement and planning capacity will be constant pinch points. Watch how quickly the new service unblocks priority sites in 2026–27.
Rules of origin and trade choreography
The export support and US/India progress are positives, but many UK suppliers live and die on EU flows. Any slippage on battery content thresholds could squeeze margin or shut doors just as output ramps. Government says it is working with industry; the proof will be in 2026–28 model cycles.
Skills throughput
The battery and EV transition needs technicians as much as PhDs. The plan promises shorter apprenticeships, sectoral upskilling and new Technical Excellence Colleges—firms should engage early with Skills England to shape curricula that match factory needs.
Pace of cheque‑to‑capex conversion
The UK’s historic weakness has been in turning grant letters into production equipment quickly. The measures are designed to close that “valley of death”; industry will want to see the Office for Investment and National Wealth Fund move at market speed.
Bottom line
This is the most coordinated push for UK EV and battery manufacturing in a decade: long‑term funding, clearer regulation, cheaper energy and a map of where to build. If industry meets government halfway—bringing projects with scale, export potential and real supply‑chain depth—the next ten years could see the UK shift from a handful of flagship plants to a network of EV and battery clusters with real gravitational pull. For now, the runway is clearer than it has been in years. Time to rotate.
Read more:
EVs and batteries move centre stage in the UK’s modern industrial strategy
