Vauxhall owner Stellantis blames EV rules for plan to close UK van factory

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Stellantis blamed the UK’s electric vehicle sales rules as it announced plans to shut its van factory in Luton, putting about 1,100 jobs at risk.

The owner of Vauxhall and Peugeot on Tuesday said Britain’s “challenging” EV sales quota played a “significant part” in its decision to consolidate its UK operations at its Ellesmere Port factory in Cheshire.

While the group aims to relocate “hundreds of jobs” from the Luton site, the decision comes as a blow to the UK’s car industry following plant closures from Honda, Ford and JLR over the past decade.

Ford last week announced 800 jobs cuts in the UK because of slower than expected EV sales, while Nissan warned jobs at its Sunderland plant, the largest in Britain, could be at risk unless the government relaxes its electric vehicle sales rules.

Business secretary Jonathan Reynolds on Tuesday evening unveiled a “fast track” consultation on watering down the UK’s tough EV quota scheme, following industry warnings that public appetite for battery vehicles is lower than expected.

“The transport secretary and I have heard you loud and clear on the need for support to make this transition a success,” Reynolds said at an industry dinner. “I want to do everything possible to encourage the take-up of EVs but I also want to do everything possible to make sure EVs are built here in Britain.”

The current scheme, modelled on China’s policy, requires a certain percentage of each carmakers’ annual sales to be zero-emission vehicles, with the target increasing each year.

Ministers are determined to stick to the target of phasing out new petrol and diesel car sales by 2030, but several concessions in the scheme — introduced to make it easier for carmakers to avoid punitive fines — could be widened through the review, said people close to the industry and government.

These include a measure in which carmakers that fail to sell enough EVs can buy credits from rivals to avoid fines, and a carve-out that allows carmakers that miss early targets to “borrow” from the future by overachieving in later years.

Ford UK boss Lisa Brankin welcomed the prospect of the review, calling the current scheme “unworkable”.

She added: “The end goal is not in question, but current demand for electric vehicles is lower than expected and not in line with the mandated trajectory.”

Industry body the Society of Motor Manufacturers and Traders said Stellantis’s decision was “a sobering reminder of the challenge and cost this industry faces in developing new EV technologies and transitioning a market that is not yet fully ready”.

Unite union called Stellantis’s move “a complete slap in face for our members in Luton, where Vauxhall vehicles have been manufactured for 120 years”. The site was established in 1905, with mass vehicle production beginning in the 1930s.

Stellantis had warned in June it could stop production in the UK unless the government did more to stimulate demand for EVs or change its current electrification policy.

Earlier on Tuesday, Reynolds said the decision was “better than it could have been”, because the company had considered shifting the work to other European factories.

“We could have lost those two key [production] lines to a different factory,” he told the House of Commons business select committee.

He added ministers learned of plans to close Luton in early July and “fought back . . . very heavily”, adding: “This is a very difficult day for people in Luton and we will be giving them full support.”

Stellantis makes Vauxhall, Peugeot, Citroën, Opel and Fiat-branded vans at the Luton and Ellesmere Port factories, as well as some Toyota models under a joint manufacturing agreement.

The group had been in talks to expand Luton to manufacturing only EVs, but costs of meeting the UK’s sales rules pushed the business into the decision, which “will potentially contribute to greater production efficiency”, it said.

Stellantis said it planned to spend £50mn to upgrade the Ellesmere Port factory as part of the consolidation process. The group employs about 840 people in Cheshire.

It added: “A comprehensive support plan for impacted employees in Luton, including hundreds of jobs to be relocated to the Ellesmere Port manufacturing site, will be made available with dedicated job support within the very dynamic Luton area.”

Additional reporting by Sylvia Pfeifer in London