Vauxhall’s parent company Stellantis has announced plans to close its van plant in Luton, days after it warned the government that it could slash production in Britain over Labour‘s tough electric vehicle sales targets.

The firm, which also owns the Peugeot, Citroen and Fiat brands, says it wants to consolidate production at its Ellesmere Port factory, which is already set up to produce electric vehicles following a £100million investment. 

In what appeared to be a swipe at the government’s tough electric vehicle sales targets, Stellantis said the announcement – which puts 1,100 jobs at risk – was made ‘within the context of the UK’s ZEV (zero emissions vehicle) mandate’.

The announcement came hours before trade group the Society of Motor Manufacturers and Traders’ (SMMT’s) annual dinner – at which business secretary Jonathan Reynolds is expected to confirm a consultation on the scheme.

He said today was a ‘very difficult day for Luton’ – but the news came with plenty of prior warning.

Stellantis said earlier this year both plants were at risk because of government pressure on car firms to ensure 22 per cent of cars sold were purely electric by the end of this year – a target many are set to miss.

For each purely petrol or diesel car sold beyond the target, car firms will be fined £15,000 – and £18,000 for each van. Car bosses had warned this was unsustainable, even as Labour’s transport secretary Louise Haigh refused to back off on the targets. 

In February, Stellantis had said it was considering retooling the Luton plant to become an exclusively electric van factory. It would have produced the electric version of the Vauxhall Vivaro, the best-selling electric van in the UK.

That plan now appears abandoned – with the closure of Luton bringing to an end 120 years of manufacturing history after Vauxhall first set up shop there in 1905. Ellesmere Port will be its only remaining UK plant.

Ellesmere Port in Cheshire is already primed to produce electric vehicles. The move comes after Stellantis warned it may cut UK production in response to EV sales targets

Business secretary Jonathan Reynolds pictured leaving Downing Street earlier today. He said today was a ‘very difficult day for Luton’

UK transport secretary Louise Haigh held crunch talks with car makers last week on the electric vehicle scheme amid concerns the targets were unrealistic

The car maker intends to relocate ‘hundreds of jobs’ to the Cheshire port around 140 miles away – with relocation packages on offer for those who want to move, and training and help finding a new job for those who do not.

It will also invest £50million in Ellesmere Port to pick up production from Luton. The Cheshire facility already produces smaller electric vans like the Citroen e-Berlingo and the Vauxhall Combo Electric.

The announcement came days after ministers met with car bosses to discuss the contentious zero emissions vehicle (ZEV) mandate – which requires car firms to sell a certain amount of electric cars each year or face financial penalties.

Ahead of announcing a consultation on the mandate, the government is believed to have made clear to car makers that it would not budge on the existing targets – despite car makers’ pleas and threats over their future in Britain.

Staff at Luton were told about the plans earlier today – with no expectation to finish their shift so they could process the news their jobs were at risk.

Workers at the Stellantis plant in Luton are represented by trade union Unite, which will begin consulting with Stellantis bosses tomorrow. 

A spokesperson from Unite described the proposal tabled ‘a complete slap in face for our members in Luton’.

They added: ‘Whatever the positive benefits this plan may have for Ellesmere Port, that is not acceptable.

‘We stand ready to support our members in doing whatever we can to ensure that historical vehicle manufacturing is maintained in Luton and we call on the government to do the same.’

Labour MP for Luton South and South Beds Rachel Hopkins called the news ‘deeply troubling’, adding: ‘The Vauxhall plant is part of the fabric of Luton’s heritage and vital to our local economy. 

‘For over a century, generations of Lutonians have worked there, contributing to the production of vehicles like the Vivaro van. These efforts have created jobs and attracted investment.’

Appearing before the cross-paty Business and Trade Committee as the news broke, Business Secretary Jonathan Reynolds told MPs the transition to electric vehicles  should not come at the expense of jobs.

He told the MPs: ‘You will be almost certainly aware by now of the news from Stellantis and obviously the news from Ford last week. This is a very difficult day from Luton, particularly.’

He said that, together with Transport Secretary Louise Haigh, he was looking at the ZEV mandate, stressing that the change to electric should not come at the expense of British industry.

He said: ‘I don’t see any tension between being committed to that transition and to UK manufacturing.

‘I’ve said repeatedly that, for me, decarbonisation cannot mean deindustrialisation. I’ve got no interest in the country hitting its climate targets by shutting down jobs and industry.’

Stellantis said in February it would re-tool the Luton plant to build Vauxhall, Peugeot, Fiat and Citroen vans – a plan now consigned to the scrapheap

Local Labour MP Rachel Hopkins called the news ‘deeply troubling’ – and referred to the Luton plant’s long history in the town

Immediately after the announcement, a government spokesperson said: ‘While it’s encouraging to see Stellantis investing in the future of its Ellesmere Port plant, we know this will be a concerning time for the families of employees at Luton who may be affected.

‘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 £300 million to drive uptake of zero emission vehicles and £2 billion to support the transition of domestic manufacturing.’

The £300million is understood to include over £200m of investment in chargepoints for electric vehicles, and £120million next year to encourage professionals to invest in electric vans.

But the SMMT says greater incentives are needed to encourage people to buy electric vehicles, and has suggested EV sales will not hit ministers’ lofty targets without them.

It said: ‘Today’s announcement is a major concern to UK automotive manufacturing but, most importantly, to the livelihoods of many. 

‘It is also 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.’

As of October, battery electric vehicles made up 18.1 of the UK’s new car sales market – suggesting firms are falling massively short. 

Demand has also grown for plug-in hybrid and hybrid vehicles, which combine an electric motor with a traditional engine. These come with lower road tax, but do not contribute to the ZEV mandate – good for motorists, not so much car makers. 

The last incentive scheme, which gave EV buyers £5,000 towards the cost of a new electric vehicle, was scrapped in June 2022.

‘The UK situation is particularly acute with arguably the toughest targets and most accelerated timeline in the world, yet without the consumer incentives that would drive the necessary demand,’ the SMMT said.

‘An urgent review of the regulation as well as measures to improve the UK’s competitiveness through an Industrial Strategy must now be the priority else the opportunities for growth this transition presents, will be lost.’ 

The Vauxhall plant had been producing commercial vehicles for almost 100 years, with the first panel vans rolling off the production line in 1932. 

It has been making vans ever since – save for during the Second World War, when its production line was co-opted to produce the Churchill tank and thousands of Bedford lorries for the war effort. It stopped making cars in 2002.

The threat of closure was first dangled in June as Stellantis UK boss Maria Grazia Davino put the government on notice over its ‘hostile’ squeeze on car makers, threatening to review the future of both plants.

Vauxhall is already making smaller electric vans like the Combo (above) at the Ellesmere Port plant in Cheshire

The Luton plant had been the ‘home of the Vauxhall Vivaro’ for decades after car production stopped in 2002

The Vauxhall Luton plant is located just one mile from Luton Airport (pictured in 2002 on the last day of car production)

She said the decision would be made in ‘less than a year’ – an ultimatum that has since come to pass. Her comments came just two months after chief executive Carlos Tavares said the firm could cut the number of cars it sells in Britain altogether.

Stellantis’ proposal is the latest piece of bad news for the UK’s car manufacturing sector and unlikely to be the last, coming hot on the heels of Ford announcing it would take the scythe to 800 jobs in administration and product design in the UK.

There is growing discontent among car manufacturers at the ZEV mandate, which is designed to force manufacturers to sell more electric vehicles, even though dealerships say drivers aren’t interested.

Under the mandate, 22 per cent of all vehicles sold this year have to be BEVs – either purely electric or hydrogen-fuelled.

The Tory government extended the ZEV mandate deadline to 2035 for all new vehicles to be purely electric.

But Labour had pledged to roll that target back to 2030 in its election manifesto, and is understood to be ‘committed’ to making that happen. There may be a stay of execution for hybrid vehicles until 2035.

It comes as Germany has joined a growing backlash against fining car makers who miss net zero targets – suggesting the firms should be allowed to keep the money to invest in cutting emissions.

Chancellor Olaf Scholz has hit out at the European Union‘s zero emission vehicle plans, which require manufacturers to reduce the emissions from their new cars and vans by 15 per cent compared to 2021 levels by next year.

The quickest way for firms to do this is to reduce the production of petrol and diesel cars and encourage people to swap to electric vehicles – but firms say motorists aren’t biting and warn jobs could be at risk if UK and EU mandates aren’t eased.

However, it will be the car firms that face penalties if they fail to shift enough battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) to hit the 15 per cent target.

This grows to a 55 per cent reduction in car emissions and 50 per cent vans by 2030. EU autocrats then want a 100 per cent reduction – i.e. no purely fossil fuelled cars and vans sold at all – by 2035.

Germany has a vested interest in protecting car firms from fines: its car industry is solely responsible for an estimated five per cent of GDP, and is home to huge names including Audi, BMW, Volkswagen and Mercedes-Benz.

Mr Scholz told reporters on Monday he wanted firms to retain any fines that would be levied so it can be invested in working towards the EU’s targets.

Germany’s Chancellor Olaf Scholz has pushed back against EU mandates requiring car makers to reduce the emissions of their vehicles by 15 per cent by next year

Germany is home to some of the world’s biggest car firms including Mercedes-Benz, Audi and BMW (pictured: the BMW plant in Leipzig)

The UK government wants 22 per cent of all new vehicles sold to be purely electric by the end of the year – a target that does not look set to be met 

‘The money must remain in the companies for the modernisation of their own industry, their own company,’ he said.

Ford last week said it would cut 800 jobs in the UK as it cut back on the production of some of its electric models – after pledging to go fully electric by 2030, scrapping cars like the Fiesta while resurrecting the Capri as an electric ‘coupe SUV’.

The jobs will largely go in administrative and product development roles, with hands-on manufacturing unlikely to be affected. However, Ford says it is assessing ‘future opportunities’ at the Dagenham engine plant. 

It said the vehicle emissions trading scheme, which allows car makers to buy and sell credits from each other as they work towards the target, was ‘unworkable’ and called for called for ‘greater flexibility’ in the scheme’s goals.

Nissan has warned of ‘irreversible’ damage to Britain’s motor industry if the mandate was not eased, after scaling back its global profit estimates by 70 per cent and announcing global job cuts. It is not clear if its UK plants will suffer.

It comes as Jaguar has ‘sunsetted’ its petrol models after pledging to go fully electric by 2030 – keeping only the electric I-Pace on the production line as it rolls out a hugely divisive rebrand. 

Car firms and dealerships are having to slap electric cars with huge, unsustainable discounts in order to shift them in big numbers as consumers tighten their wallets.

Data supplied to This is Money by Auto Trader earlier this month suggested some EVs were being discounted by as much as £16,000 to get them off of forecourts.

Established manufacturers also face intense competition from abroad, particularly China, which has flooded the market with budget EVs from manufacturers such as BYD and MG that drastically undercut their prices.

Robert Forrester, chief executive of car dealership chain Vertu Motors, warned in September car firms were also having to deliberately delay the delivery of non-electric cars into next year to get close to the ZEV mandate goal.

‘It’s almost as if we can’t supply the cars that people want, but we’ve got plenty of the cars that maybe they don’t want,’ he said.

A Ford worker at the company’s Dagenham plant. The company plans to cut 800 jobs, largely in administrative and product development roles

Mr Scholz, seen here visiting a BMW plant in Munich in December last year, has called for the fines that would be levied to be spent by manufacturers on reducing emissions instead

Research by This is Money suggests some of the biggest car firms and groups are falling behind on targets for battery electric vehicle sales

UK transport secretary Louise Haigh held crunch talks with car makers last week on the next steps for the zero emission vehicle mandate. She has insisted the government will hold firm on the scheme.

A Government spokesperson said following the talks:  ‘Recognising the global challenges the industry has been facing, ministers underlined the Government’s commitment to working constructively and in close partnership with the sector as we support the transition to electric vehicles by 2030.

‘The UK automotive sector now has the fastest growth of zero emission vehicles of any major European market, and we’re providing more than £2.3 billion to support industry and consumers in making the switch, with 57 new public electric vehicle chargers added on average each day.’

In Germany, meanwhile, economy minister Robert Habeck has suggested the country could even cover off fines for two years to enable manufacturers to catch up with regulation.

Hildegard Mueller, head of German car maker lobby group VDA, said: ‘In view of the difficult economic situation, the lack of demand for e-mobility from consumers and the continued inadequate framework conditions, further burdens from possible fines in 2025 must be avoided.’

Official EU figures suggest around a quarter of all cars sold in Germany last year were either pure electric or plug-in hybrid electric vehicles. 

Uptake in other EEA countries was highest in Norway, where 91 per cent of all new cars were BEVs or PHEVs.