Stellantis threat

Car maker in UK production warning over EV policy

Car manufacturing-SMMT
UK car manufacturing is coming under pressure over government transition plans

One of Europe’s big car makers is warning it may halt prduction in the UK unless the government does more to increase demand for electric vehicles.

Stellantis, which owns 14 brands including Vauxhall, Alfa Romeo, Fiat, Citroën and Peugeot, said plants in Luton and Ellesmere Port near Liverpool face closure within a year as the company loses patience over Westminster’s approach to the industry.

Maria Grazia Davino, the boss of Stellantis, told reporters: “Stellantis UK does not stop, but Stellantis production in the UK could stop.

The UK government initially set a goal of 2030 to ban sales of new petrol and diesel cars, but delayed the plan by five years to give consumers more time to make the transition to electric vehicles.

Ms Davino warned: “If this market becomes hostile to us, we will enter an evaluation for producing elsewhere”.

ManMohan Sodhi, Professor of Operations and Supply Chain Management at Bayes Business School (formerly Cass), said Stellantis “is only the first auto company to take its complaint against UK requirements directly to the public—others will surely follow.”

He said the present situation is another consequence of Brexit, with UK regulation not only different but also much more restrictive than the EU’s and without consideration of the end goal of emissions reduction. 

“The EU and the UK have imposed regulations on automakers for CO2 emissions reduction targets. However, there is a stark contrast in their approaches. Manufacturers can meet the requirements in the EU by selling a mixture of hybrids and EVs, a more flexible approach.

“On the other hand, the UK’s approach is more stringent, requiring the sale of a minimum percentage of fully electric cars or facing fines of £15,000 per non-compliant vehicle sold. This stark contrast in regulations has significant implications for the automotive industry.

So far in 2024, Stellantis has sold only 16% electric cars of its total sales in the UK against the requirement of 22% for this year.

“Range anxiety, poor charging infrastructure, and the price of electric cars have meant the demand for fully electric vehicles has slowed down in the UK — as elsewhere — so many auto manufacturers not only face huge penalties starting this year, with these penalties growing rapidly annually till 2030 when the percentage of electric cars to be sold in the UK should be 80%. 

“On the other hand, the demand for hybrid cars has taken off, so meeting EU requirements is quite easy for manufacturers. Hybrids also help with emission reductions.

“There is no point making electric cars or vans that can’t be sold, so the UK would have to offer massive subsidies to reluctant end consumers — corporate fleets are also subsidised in the UK — but this option is increasingly unrealistic if there is nowhere to charge all these cars and consumers prefer hybrids regardless.

“The only other option is even harder: swallow pride and synchronise the regulation with the EU’s, at least on this specific matter.” 

Car makers are also facing competion from China and this is prompting a further wave of mergers. German car making giant Volkswagen is invest up to $5bn (£3.94bn) in Tesla rival Rivian.

The deal creates a joint venture that will allow VW and the US-based electric vehicle (EV) maker to share technology. Rivian shares jumped by almost 50% after the announcement.

The tie-up comes as competition intensifies between EV makers and Western countries move to impose tariffs on Chinese imports.

Under the agreement, VW said it will initially invest $1bn in the electric truck and SUV maker, with another $4bn to be put into the company by 2026.

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