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Autonomous and electric vehicles

Autonomous and electric vehicles (EVs) are among the key innovation areas within the automotive market.

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Introduction

This is one of the 16 market profiles produced as part of the Economic Market’s foresight study commissioned by the North East LEP. It provides an overview of the future growth prospects for the Autonomous and Electic Vehicle market globally, a summary of the enterprise base serving the market in the North East and relevant regional assets, and an analysis of how the continued convergence of global trends will affect future market development.  

These markets were selected as those most likely to present opportunities for future regional growth in the North East LEP. This was done based on a trends analysis conducted by Frost and Sullivan, which identified 37 high impact trends driving continued change and growth in these markets globally. A shortlist of markets from this trends analysis was then cross-referenced against the current North East position by Cambridge Econometrics. This analysis identified the most significant opportunities for the North East LEP. 

Each of these profiles also uses findings from the Data City platform to quantify the number of firms serving the Autonomous and Electic Vehicle market in the North East. This platform links companies house data to companies’ websites and uses the website text and machine learning to classify firms into Real Time Industrial Classification Codes, which can allow analysis of markets often too emergent to be precisely measured in SIC codes. The data from this platform has been triangulated against ONS data to consider a variety of perspectives on the market. 

More detail about the methodology can be found here for the 16 market profiles.

Established status

status in the North East with an extensive value chain

International scope

in terms of technology development, particularly electric vehicles and batteries

Significant presence

in the North East with 5.4% of firms in Electric Vehicles having a location in the North East LEP

Description and global outlook 

The market for EVs is being driven by the increasing demand for efficient, environmentally friendly and sustainable transportation models. This is also supported by a global push from policy makers and lowering cost of enabling technologies such as battery storage and Internet of Things (IoT). 

Market drivers

Demand is arising from the potential benefit of AVs over manual systems such as:

  • Lower risk of accidents
  • Lower operating costs
  • Secured mobility
  • Increased flexible solutions.

There has also been increasing acceptance across different countries for autonomous systems, and improvement in real-time data processing and calculations which has further boosted the market.

Introduction of 5G is expected to be the key catalyst for the AV market which could enable even larger data sharing and processing to take place in real-time. COVID-19 had initially impacted the scale of EVs due to broader travel and commercial restrictions, but the overall market was not significantly impacted and the sales picked up across the key markets of China and Europe. The supply chain of the automotive industry was disrupted resulting in a shortage of critical components such as sensors and chips.

Key challenges are:

  • The limited performance of batteries
  • Traceability and transparency in the raw materials supply chains
  • End-of life battery management
  • Environmental issues due to mining of raw materials for battery production.

For the AV market, the challenges are limited regulatory support in several markets, lack of adequate infrastructure and high cost of research.

Scale and scope of global market 

The global autonomous vehicle market was estimated to be US$ 68 billion in 2020, with the expected growth rate of CAGR 39% for the period of 2021-2025, while the global electric vehicle market was US$ 182 billion predicted to grow at CAGR 22.6% for the same period.

Globally China has emerged as the leading market for EVs, followed by Europe and the US. However, in terms of adoption, Norway has the highest share of EVs on the road compared to internal combustion engine cars. In the autonomous vehicle market it’s the US that leads, with a large presence of major automotive firms who are extensively investing in the technology. The market is also supported by high levels of adoption and regulatory support which has enabled faster go-to-market for new features.

The UK has several start-ups and automotive players who are actively engaged in development of AVs for domestic and global markets, with several existing cars having connected capabilities. The market is also supported by UK government funding and is seen as the means for road safety and greener transportation.

However, there can challenges with data sharing and protection between UK and other European players, hampering the market. Some of the leading global electric vehicle companies are Tesla, Mercedes, Nissan Renault, Baojun, and Mitsubishi. Globally leading companies across autonomous vehicles are Uber, Tesla, Waymo, Unity Technologies, and Swift Navigation.  

$68 billion

The global autonomous vehicle market was estimated to be US$ 68 billion in 2020, with the expected growth rate of CAGR 39% for the period of 2021-2025

Readiness of Private Capital 

Commitments already made clear from Nissan and Go-Ahead. Grants and R&D supports help to crowd-in private capital interest. Software for EV and automated vehicles are particularly ‘hot’ for investors, with venture and institutional capital targeting ‘smart’ transport and electrification of transport as a top-five target.  

2020 was the lowest quantum of UK investment activity in transportation since 2017, due to pressures from coronavirus impacting investment decisions. However, this trend is expected to reverse strongly as the market moves aggressively towards low-carbon transportation solutions.

North East presence and capabilities

Regional overview

The automotive and transport manufacturing sectors are significant in the North East. 

OEMs include Nissan, Komatsu, Caterpillar and Cummins.

AVID Technology, based in Cramlington, designs and manufactures cutting-edge electrified powertrain components and systems for heavy-duty and high performance hybrid and full electric vehicles.

Sunderland-based Hyperdrive Innovation utilises market leading lithium-ion battery technology to deliver solutions to challenging applications for electric vehicles and battery storage systems.

Advanced Electrical Machines, based in Blaydon, develops advanced motor technology, the High-Density Switched Reluctance Machine (HDSRM), for hybrid, range extended and electrical commercial vehicles.

In the 2014 Research Assessment Exercise, 20.1% of research in aeronautical, mechanical, chemical and manufacturing engineering was rated 4* or higher. 21.8% of research in physics was rated 4* or higher. With regards to the Witty Review, North East universities were in the top 20 for research publications for 11 subjects: Advanced materials and nano-technology (Durham, 16th); automotive (Newcastle, 18th) and energy storage (Newcastle, 7th; Durham, 9th). 

The North East LEP area has a strong and diverse university sector, with over 85,000 students studying at four universities: Durham University; Newcastle University; Northumbria University and University of Sunderland.

In 2018/19 there were 31,475 enrolments in the four universities in the North East LEP area. Subjects that are a particular specialism by one or two of the universities include engineering and technology (Newcastle). 

Furthermore, it has been a priority of the North East LEP to increase the enrolment in STEM qualifications. Overall, the change in total graduates between 2014/15 and 2018/19 and who studied a STEM related subject has been roughly in line with the UK average at around 10%. However, some subjects have experienced a much faster increase in graduates, most notably in computer science, where the number of graduates increased by over 40% in the space of four academic years, compared to 19% in the UK as a whole.  

According to data on occupations, the North East has a higher share of employment in process, plant and machine operatives occupations and a lower share of employment in associate professional and technical occupations compared to the average for England excluding London. 

There are nine further education (FE) colleges, providing technical education and further learning opportunities. These colleges are brought together through the North East LEP area College Hub, which has a broad remit to support the implementation and achievement of the Gatsby Good Career Guidance Benchmarks, as well as the brokering of strategic employer partnerships with further education institutions. According to the Local Skills Report from the North East LEP, a recent survey of FE colleges recorded a strength in engineering and manufacturing technology subject areas. 

The sectors with the largest number of apprenticeship achievements correspond to the priority sectors for the North East LEP area namely business, health, engineering and construction. 

Manufacturing accounts for a significant share of the North East LEP areas output, with specialisms in automotive and other vehicle manufacturing, pharmaceuticals and chemicals. The region has a number of programmes and initiatives to expand the advanced manufacturing sector, with a focus on shifting to greener processes and products, and digitisation. 

The North East Automotive Alliance is an industry-led cluster group that supports the economic sustainable growth and competitiveness of the automotive sector in the North East. This is the largest automotive cluster group in the UK, with 300 participants. 

There are several centres of excellence for manufacturing skills, including the Centre of Excellence in Sustainable Advanced Manufacturing (CESAM), the Skills Academy for Sustainable Manufacturing and Innovation (SASMI) at Gateshead College, Nissan Academy and Hitachi University Technical College. Key manufacturing and test sites include the A19 Enterprise Zone, IAMP and Zero Carbon Future, the Automotive and Manufacturing Advanced Practice Centre (AMAP) and the University of Sunderland. 

Analysis of GVA and employment by SIC sectors 

The most relevant SIC classification of industries for the electric and autonomous vehicles emerging markets are: 

  • Electrical equipment manufacturing
  • Motor vehicles manufacturing
  • Other transport equipment manufacturing.

Both electrical equipment and motor vehicles manufacturing are highly productive and employ 3,500 and 12,900 respectively in the North East. Other transport equipment manufacturing is less productive than the UK average for all industries, and employs 1,900.

Motor vehicle manufacturing is a significant specialism for the North East – with a Location Quotient of 2.4 – demonstrating that the industry is 140% more concentrated in the region compared to nationally. All of these three sectors have declined in jobs over the past 38 years, but continued to increase GVA. Future projections indicate continued job decline, but with GVA growth. 

Motor vehicles manufacturing

Electrical equipment manufacturing

Other transport equipment

The Data City findings

The Data City provides company data based on an AI-driven taxonomy search of terms and content on company websites. This is then connected to companies house data for each company – and allows an aggregate analysis for new industry and market definitions. The data captures the number of business branches in the North East LEP area, which means firms registered outside of the North East LEP but with branches in the area are captured in the data. 

The Data City suggests that there were 42 active firms operating in electric vehicles in the North East LEP area in June 2022, representing 5.4% of such firms in the UK. On the same date, there were six active firms operating in autonomous vehicles in the area, making up 1.5% of the UK total. 

Electric vehicles

Location quotients

In terms of enterprise counts, the Data City intelligence suggested that Sunderland, in particular, is a national centre for electric vehicles, with 16 enterprises and the highest location quotient for this market in the UK. County Durham, Gateshead and Northumberland are also nationally important, with location quotients within the top 30 in the UK, and Newcastle also had a higher concentration of these firms than the UK average in this data.

Out of region locations

The Data City results suggest that just under half of enterprises in the electric vehicle sector in the North East LEP area had no additional location outside the North East region. Of the 42 electric vehicle enterprises with a presence in the North East LEP area, about 21% had an additional location in London, but this was not a large proportion compared to the overall number of firms in that sector in London. Four firms with a location in the North East were also located in Scotland and the same was true for South West England, equivalent to similar proportions to these area’s national share of electric vehicle enterprises. 

Sector crossover

One of the innovative features of the Data City methodology is that it allows firms to be classified in multiple sectors. The platform does so through real time industry classifications (RTICs), which are constantly evolving classifications generated by an AI from companies’ websites. Firms can be classified under multiple RTICs at any one time. This means the data can be used to demonstrate interdependencies where sectors overlap. 

In the North East LEP area electric vehicles sector, by far the largest overlap was with the net zero RTIC, with nine out of ten enterprises classified in both, a similar proportion to the UK. About a quarter of North East electric vehicle firms are classified in the cleantech RTIC and the same is also true for the data infrastructure and LI ion battery supply chain RTICs. Compared to the electric vehicles sector nationally, the North East sector had a stronger degree of overlap with these three RTICs, suggesting there may be greater interaction between them in the North East than elsewhere. Overall, in the UK electric vehicles firms operated in 23 additional RTICs, of which 8 were operated in by North East firms.
 

Subsectors

The Data City methodology also includes individual subsectors within the RTIC taxonomy which allows detailed analysis of the North East LEP’s focus within the electric and autonomous vehicles sector. 

Both nationally and within the North East, most electric vehicles firms have a particular focus on the net zero low emission vehicles RTIC subsector. In the North East, electric vehicles firms have a stronger focus on cleantech energy production, data centres and battery cells than nationally.
 

Locations map

Electric vehicle enterprises are concentrated in Sunderland, Gateshead, County Durham and Northumberland. Within County Durham they are located throughout the area but within Northumberland they are largely concentrated in the South East of the area.

Autonomous vehicles 

Location quotients

Only three of the seven North East local authority areas include automotive vehicle enterprises, with only Gateshead and Northumberland having a higher concentration than the UK as a whole. For both electric and autonomous vehicles, the number of enterprises in the table below sums to more than the North East total due to some enterprises having sites in more than one North East local authority area.

Out of region locations

The results suggest that the 6 automotive vehicle enterprises in the North East LEP area have additional locations across the country. Two thirds of them have an additional location in South East England, half have a location in Yorkshire and the Humber and half have a location in South West England.

Sector crossover

In the North East LEP area autonomous vehicles sector, the largest overlap was with the electronics manufacturing RTIC, with two thirds of enterprises classified in both. Half of North East autonomous vehicle firms are classified in the photonics RTIC and the same is also true for the medtech and computer hardware RTICs. Compared to the autonomous vehicles sector nationally, the North East sector had a stronger degree of overlap with all four RTICs. Overall, in the UK autonomous vehicles firms operated in 38 additional RTICs, of which 12 were operated in by North East firms.

Subsectors

In the North East, two thirds of autonomous vehicles firms have a particular focus on the autonomous vehicles beta test RTIC subsector, a larger proportion than nationally. North East autonomous vehicles firms have a stronger focus on the measuring and metrology device manufacturing subsector and on the photonics remote sensing subsector than nationally.

Locations map

The small number of autonomous vehicle enterprises are concentrated in South East Northumberland and in Gateshead, with only one elsewhere (in the south of County Durham).

Regional prospects

A critical part of this study is to shortlist which emergent markets represent “hot prospects” for the North East economy in the future. Using the findings from the study, and the assessment framework below. Whilst there were few findings that related to autonomous vehicles as a particular strength or presence in the North East, electric vehicles could be more thoroughly assessed. The two markets are rated as shown below:  

Autonomous Vehicles: 

  • Emergent status in the North East
  • International scope in terms of technology development, particularly electric vehicles and batteries 

  • Small presence in the North East, with 1.5% of firms in this market having a location in the North East LEP (less than 2% of firms in all sectors).

Electric Vehicles: 

  • Established status in the North East 
  • International scope in terms of technology development, particularly electric vehicles and batteries
  • Significant presence in the North East, with with 5.4% of firms in this market having a location in the North East LEP (more than 2% of firms in all sectors).

 

Existing regional specialisms

Strong: high location quotient; high employment and company presence

Firms

Moderate: 1 to 3 major firms and/or start-ups and SME presence

Value chain cluster

Moderate: 1 to 3 major firms and/or start-ups and SME presence

Innovation / technology

Moderate scale of R&D activity, with national leadership

Skills and human capital

Directly relevant: foundation and specific skills, with infrastructure and provision

Local institutions

Relevant institutions

Local assets

Relevant major assets: of national significance

Click here to download the assessment framework.

Strategic commentary 

OEMs and fleet operators are currently making strategic decisions around investment and transitioning to EVs within the next five years, driven by the development of global trends discussed above. This is anticipated to create a bow-wave of new demand for commercial and private passenger EVs, which means there is a significant opportunity available in this market for the North East to capitalise on. 

As highlighted above, the North East already has a strong enterprise base and asset collection ready to serve this market. Nissan Leaf’s replacement EV Hub and new model will be built in Sunderland, bringing over £1bn FDI into the region. Regional backing for the EV transition could also generate further interest from other local vehicle OEMs and Operators. The North East region is also home to two of the largest privately owned public transport operator companies (Go-Ahead Group and Arriva), which means there are significant opportunities in the application of these technologies in the public sector too. 

In addition, there has been an increased degree of start-up and SME representation established in the past few years. Connected Energy, Avid Technology and others, supported further by generous and plentiful grant and R&D funding from national public sector agencies such as DfT, OLEV, and InnovateUK, have started to broaden the business base in this market. 

EV vehicle development growth, however, relies on technology transfer from other markets. As highlighted in the interaction grid below, it is anticipated there will be major dependencies on several other markets, including many areas of applied digital technology such as software development, cybersecurity, and the Internet of things. This highlights the importance of regional development in these markets also to fully capitalise on the North East’s strengths in the EV market. 

At the same time, the table highlights how the development of EV technology can enable growth in other markets. Energy storage, smart grids and smart logistics are set benefit from improvements in EV technology. It will be important to coordinate skills demand and supply to ensure that workforce needs are met across these markets, and industry bodies have an important role to play in ensuring that technological developments are fully integrated across different areas. 

Interactions and dependencies 

Connected markets

Energy storage Energy generation Robotics Space and satellites
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