Stellantis Plant Shutdown Confirms EV Manufacturing Concerns

Stellantis, the parent company of Vauxhall, Peugeot, Fiat and Citroën has just made a stark announcement.

The manufacturer is set to close its van manufacturing plant in Luton in April next year.

Vauxhall first established operations in Luton in 1905, meaning this closure marks the end of over a century of manufacturing in the area. 

The plant which has produced commercial vehicles since 1932 has played a vital role in boosting the local economy, contributing to the town's industrial heritage.

It's closure shrinks the UK's manufacturing sector further, during a strong political and industry push to revitalise the sector.

This decision comes amid mounting pressures from the UK government for manufacturers to meet stringent EV sales targets which are part of the zero-emission vehicle (ZEV) mandate.

If these targets aren't met, manufacturers face heavy fines.

Responding to this Stellantis has sought to consolidate its UK operations at its production facility in Ellesmere Port, Cheshire.

Ellsemere Port is the UK's first EV-only manufacturing plant, receiving a £100m ($US125.7m) investment to manufacture electric vehicles and currently manufactures smaller electric vans such as the Citroën e-Berlingo and the Vauxhall Combo Electric.

An additional £50m ($62.7m) investment is planned there to further boost production capacity.

Stellantis's decision speaks to the growing pressure for automotive manufacturers to meet ambitious EV sales targets, vindicating concerns that current expectations are not in step with market demand. 

The controversy of current EV targets

The ZEV Mandate has set an ambitious target for EVs: they should comprise 22% of total market sales in 2024, rising to 28% by 2025.

This is despite the fact that the Society of Motor Manufacturers and Traders (SMMT) has predicted that EV sales will only reach 18.5% in 2024 despite manufacturers' significant discounts to stimulate demand.

The mandate came into law in January of this year, creating significant challenges for manufacturers in the drive to electrification. 

These include global brands like Honda and Toyota. 

Taking Toyota as an example, its slower adoption of BEVs compared to competitors BYD and Tesla leading it to lag behind in meeting ZEV requirements in Europe and California. 

The manufacturer has now ramped up EV production with models like the bZ4X and committed significant investments toward battery technology.

But sales have not matched this increase in production.

In October Toyota postponed its US EV operation plan due to lagging sales, moving its launch to 2026.

Many other automotive manufacturers have taken similar moves, with many in the industry calling ZEV requirements unrealistic and overambitious.

Manufacturers calling for change

According to EV Magazine, Nissan has proposed two critical reforms to the ZEV Mandate:

1. Increased flexibility: Allow manufacturers to borrow credits from future years to meet short-term targets.
2. Two-year monitoring period: Replace penalties for 2024–2025 with a monitoring phase to better assess market trends and adjust strategies.

The manufacturer has asserted these changes will provide vital breathing room, enabling manufacturers to adapt while safeguarding long-term goals including achieving an 80% EV market share by 2030.

"The Mandate risks undermining the business case for manufacturing cars in the UK and the viability of thousands of jobs and billions of pounds in investment," says Guillaume Cartier, Chairperson for Nissan's AMIEO region.

"We need urgent action from the Government by the end of the year to avoid a potentially irreversible impact on the UK automotive sector."

Oliver Zipse, BMW's CEO has gone further to claim that the 2035 petrol car ban is unrealistic, advocating for a more flexible and tech-diverse approach to Europe's green automotive transition.

“A correction of the 100% BEV [Battery Electric Vehicle] target for 2035 as part of a comprehensive CO2-reduction package would also afford European OEMs less reliance on China for batteries,” Oliver says, calling for a "strictly technology-agnostic path within the policy framework" instead of "overly prescriptive regulations." 

This advocacy against overly prescriptive regulation is not only present in Europe and the US. 

In Japan Subaru, Toyota and Mazda have been workshopping their Multi-pathway concept.

This concept advocates for EV adoption and innovation alongside other sustainable alternative technologies in a way that broadens rather than narrows manufacturer and consumer flexibility.

"Achieving a carbon-neutral society is a challenge that must be undertaken by all of Japan's industries and society as a whole," says Atsushi Osaki, Representative Director, President and CEO, Subaru Corporation.

"As we continue to refine electrification technology, we will also enhance our horizontally-opposed engines with an aim to use carbon-neutral fuels in the future.

"Moving forward, the three companies sharing the same aspiration will continue to advance the pursuit of sustainable excellence in Japanese car manufacturing."

Broader reasons for challenges in meeting targets

There are a myriad of reasons that meeting the ZEV mandate is challenging for automotive manufacturers. 

These struggles primarily relate to technological adaptation, supply chain gaps and market readiness.

On the supply chain side, we need to look at the specific raw materials involved in EV manufacturing. 

Lithium, cobalt and nickel are in limited global supply, and procuring them amid geopolitical and environmental concerns creates bottlenecks.

Many countries also lack a strong domestic supply chain for battery components, leading to slowed production and increased costs.

On top of these costs come the investment needed to develop EV platforms, with manufacturers having to invest in new research, processes and facilities. 

Many manufacturers underestimated how high these costs would be when they started their journey, facing the dual burden of maintaining ICE production while developing EV capabilities.

There's also the difficulty of producing reliable EVs at scale.

Technological hurdles like charging infrastructure, thermal management, range and battery performance must be overcome while companies battle to stay competitive.

Finally, one of the biggest challenges for automotive manufacturers when it comes to meeting ZEV targets is market readiness. 

In many global markets charging infrastructure is underdeveloped and electricity grids are unreliable. 

This subsequently leads to slower consumer adoption, meaning manufacturers struggle to sell the mandated number of EVs. 

When the demand isn't there, neither is the profit.

This misalignment between market conditions and regulation is perhaps the biggest challenge for manufacturers, who on the whole have been extremely willing to pursue broader EV innovation, adoption and production.

What this indicates about the state of EV manufacturing

The failure of many manufacturers to meet the ZEV Mandate highlights that EV manufacturing is not merely an extension of existing automotive expertise but a fundamental paradigm shift.

It requires systemic changes across supply chains, manufacturing technologies, and consumer ecosystems.

The challenges also point to the need for coordinated efforts among policymakers, automakers, and infrastructure developers to ensure a smoother transition to a zero-emission future.

Manufacturers are not complaining to complain, or resistant to electrification.

The extent that many large companies have sought to increase EV production, innovation and research is evident of their desire to be part of this sustainable shift. 

But targets must be made with the industries they'll impact in mind. 

More flexibility and support is needed, especially with the slowing nature of EV demand. 

To make this transition sustainable and effective, policymakers must listen to manufacturers and shift their approach from a hardline EV transition to an open, flexible model with space for other sustainable alternatives. 

The Multi-pathway approach may be the answer, across not only Japan but the UK, Europe and the US.

Make sure you also check out EV Magazine's coverage of this story, where they delve deeper into existing consumer barriers to EV adoption.

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