The closure of Vauxhall’s Luton van plant is a car crash for the 1,100 workers who could lose their jobs and threatens to trigger a pile-up for a government facing acute pressure from manufacturers over its plans to transition to an electric-only future.
Stellantis, Vauxhall’s parent company which also owns Citroen, Fiat and Peugeot, has been publicly mulling what to do with its UK operations, split between Bedfordshire and Ellesmere Port, for some time.
It’s a familiar pattern from a multinational well used to driving favourable deals from national governments keen to hang on to historic manufacturing bases.
The global chief executive Carlos Tavares makes disparaging noises about the investment climate, unions and ministers respond, a deal is done.
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Just three years ago the then business secretary, Kwasi Kwarteng was celebrating securing a commitment to electric small van production from Stellantis on Merseyside after a similar period of uncertainty. (That deal was announced so hastily that the vehicles on display at the media launch were all diesel models, parked carefully to obscure the exhaust pipes from the cameras).
A blow to government, industry and Luton
Any complacency that this round would end similarly was blown away by the announcement that the Luton plant will close after 119 years making cars and vans, news that was only conveyed to ministers this morning.
It’s not all bad news. Production of the Vivaro electric van will move 170 miles north in a £50m investment in Ellesmere Port, as will some of the jobs.
But this is undeniably a blow, both to the UK car industry and a government already struggling to quell concern about its transition to EVs.
Stellantis was crystal clear about the trigger for this move. The decision was made, it said, “within the context of the UK’s ZEV Mandate”, a reference to targets to produce a proportion of zero-emission vehicles each year or face stiff penalties.
Introduced by the last Conservative government, this year the target is 22% for cars, rising to 28% in 2024, en route to a ban on new petrol and diesel car sales the new administration has brought forward to 2030. For every sale outside the mandate, manufacturers will be fined £15,000.
When the targets were introduced, the industry forecast EVs would account for 23% of sales. This year, while EV sales are the only sector still rising, they account for just 18% of the total.
Successful lobbying
For months manufacturers have been united in criticising the targets, saying they do not reflect softening consumer demand for EVs, risk making the UK uncompetitive for investment, and calling for government action to incentivise private sales.
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Even before Vauxhall’s decision the lobbying appeared to have worked.
The hammer blow for Luton fell just a few hours before Business Secretary Jonathan Reynolds was due to tell an industry black-tie dinner on Park Lane that he will consider easing targets in a “fast-track” consultation.
The outcome of that process now looks to be a major test of Labour’s priorities and its ability to manage trade-offs. The government could increase flexibilities, including the ability to buy credits from manufacturers who exceed targets, like Chinese all-electric manufacturer BYD, or Elon Musk’s Tesla.
A government that won power on a promise of green growth cannot abandon a rapid transition, but it cannot deliver either without a viable consumer market that attracts and sustains private investment.