UK to Relax Electric Car Mandate as Vauxhall Plant Closes
The UK government is set to soften its rules demanding that car manufacturers transition to electric vehicle (EV) production. This change comes in response to pressure from the automotive industry, but it arrives too late to prevent the closure of Vauxhall’s van plant in Luton, where 1,100 jobs are now at risk.
Ministers have agreed to review the mandate that requires at least 22 percent of cars produced in British factories to be battery-powered. Non-compliance with these regulations would result in either purchasing credits from competitors who meet the targets or paying a fine of £15,000 per non-compliant vehicle.
Following warnings from car industry executives that low customer demand would make meeting the targets exceedingly difficult, potentially leading to factory closures and job losses, ministers will now consult with car manufacturers. This will provide them with more time to achieve their targets while still increasing electric car production in the coming years.
The news of the policy shift coincides with the announcement by Stellantis, the owner of the Vauxhall brand, that it plans to close its Luton factory, which manufactures Vauxhall Vivaro vans. The plant was scheduled for an upgrade next year to accommodate the production of electric models.
However, Stellantis had previously cautioned that the site’s future was at risk if there were not increased efforts to encourage consumers to purchase electric vehicles. After a challenging year, the company has decided to cease operations at the Luton site. Strained by high energy costs following Russia’s invasion of Ukraine, car manufacturers have had to pass these expenses on to their customers, but are now facing customer resistance.
During the pandemic, factory closures created a shortage of cars and allowed manufacturers to raise prices, but now, as factories produce more vehicles, they are confronted with consumers grappling with higher energy bills and mortgage payments. Efforts to sell more electric cars have also slowed. The higher production cost of EVs, due to expensive battery materials, has pushed manufacturers to slash prices, impacting margins.
Danni Hewson, Head of Financial Analysis at the stockbroker AJ Bell, commented: “The decision not to follow through with further investment at the Luton plant will be a blow and is an indicator that car makers feel backed into a corner. The big question will be how to persuade reluctant motorists to make the shift. Lower prices are clearly one option and that is already impacting car makers’ profits. But for some drivers making the switch just doesn’t make sense because they don’t have charging options at home or feel the current charging infrastructure where they drive isn’t up to scratch.”
Luton is one of two major plants Stellantis owns in the UK; the other is in Ellesmere Port. The Ellesmere Port site focuses on smaller vans like the Vauxhall Combo, after the discontinuation of Astra car production in 2021. Van manufacturing will now be concentrated solely at the Ellesmere Port site, where Stellantis aims to relocate many of the Luton jobs.
The plants export their vehicles under the Opel brand across Europe, along with producing vehicles under the Citroen and Peugeot brands, also owned by Stellantis. Last month, Stellantis reported that sales fell by 27 percent, equivalent to €12 billion, in the three months ending September compared to the previous year. The company emerged from the merger of several large brands, including Citroen, Peugeot, Chrysler, and Fiat, and competes with other automotive giants like Volkswagen and Toyota.
A government spokesperson stated, “We have a longstanding partnership with Stellantis and we will continue to work closely with them, as well as trade unions and local partners on the next steps of their proposals. The government is also backing the wider industry with over £300m to drive uptake of zero-emission vehicles and £2bn to support the transition of domestic manufacturing.”
