Stellantis CEO Orders Review of UK Plants Amid Fresh Closure Threat
ZEV Mandate Poses Threat to Vauxhall Owner’s Business Model, Says CEO Carlos Tavares
Vauxhall owner Stellantis has initiated a strategic review of its two van-making plants in the UK, with the possibility of permanent closure, according to CEO Carlos Tavares.
Stellantis is considering shutting down the Ellesmere Port and Luton facilities as a result of its disagreement with the UK government over the ZEV (Zero Emission Vehicle) mandate, which aims to boost electric vehicle sales.
“The ZEV mandate is significantly impacting our business model, leading us to conduct a strategic review of our manufacturing footprint,” Tavares stated during the company’s recent earnings call.
Tavares mentioned that the company is engaged in an intensive and productive dialogue with the government regarding the mandate but has yet to receive satisfactory answers.
Stellantis’s Opposition to the ZEV Mandate
Stellantis has been vocal in its opposition to the ZEV mandate, arguing that it does not align with market demand. The mandate requires brands to achieve 22% of their total UK new car sales from electric vehicles this year. Companies failing to meet the target face a penalty of £15,000 for each combustion-engined car sold above the threshold.
In June, Maria Grazia Davino, Stellantis’s UK head, first raised the possibility of ending van production due to the ZEV mandate. Tavares’s recent comments further escalate the situation, posing a challenge for the new Labour government, which faces its first threat of a manufacturing facility closure by an automaker.
Current Manufacturing Operations
Currently, Stellantis manufactures compact electric vans for its brands, including Peugeot and Citroën, in Ellesmere Port and mid-sized combustion-engined vans in Luton.
Stellantis had previously committed to producing electric versions of its mid-sized van range at the Luton plant starting next year. However, Tavares stated that the company cannot continue production in the UK while being subject to the ZEV mandate.
Potential Consequences
According to David Bailey, a professor of business economics at the Birmingham Business School, Stellantis’s threat to close the UK plants is credible. The company has the flexibility to shift production to other locations across Europe.
The UK has faced challenges in remaining cost-competitive compared to manufacturing locations in southern and eastern Europe. Stellantis plans to produce the same van range currently built in Luton at a refurbished plant in Turkey from 2025. Additionally, the company will produce the same models as Ellesmere Port at its Mangualde plant in Portugal, also from 2025.
If Stellantis follows through with its threat, it would mean abandoning a £100 million investment in Ellesmere Port, which included government funding, and the £100 million upgrade given to the Luton plant in 2019.
