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The government wants to water down rules that require car manufacturers to switch to making battery-powered cars after pressure from the industry.
But the move comes too late to save Vauxhall’s van factory in Luton, where 1,100 jobs are at risk.
Ministers have agreed to overhaul the rules, which state that at least 22 per cent of cars made in UK factories must be battery-powered. Breaking the rules means either buying credits from competitors who beat these targets or paying a fine of £15,000 per car.
After warnings from car chiefs that low customer demand would make it impossible to meet the targets, leading to factory closures or cutbacks, ministers will consult with carmakers to give them more time to hit their targets while still making far more electric cars in the years to come.
The news comes as the owner of the Vauxhall brand said it plans to close its factory in Luton, putting 1,100 jobs at risk.
The factory that makes Vauxhall Vivaro vans was to be inspected next year to make electric models.
But Stellantis, the major carmaker that owns the brand, had also warned that the site was at risk if more was not done to encourage the public to buy electric cars, and after a tough year it has decided to pull the plug.
Automakers have struggled with high energy costs following Russia’s invasion of Ukraine, and they have had to pass the cost on to customers. They did so with great success in the aftermath of the pandemic, when factory closures meant a shortage of cars.
But now that factories have churned out more cars, they are being met by customers who feel pressured by higher energy bills and mortgage payments. Their efforts to sell more electric cars have also stalled. Electric cars cost more to manufacture because of the expensive materials needed to produce their large batteries.
Stretched customers are choosing them at a slower rate, meaning automakers have had to cut their prices, eating into margins.
Head of financial analysis Danni Hewson at stockbroker AJ Bell said: “The decision not to follow through with further investment at the Luton plant will be a blow and is an indicator that carmakers feel backed into a corner.”
“The big question will be how to persuade reluctant drivers to make the switch. Lower prices are clearly a possibility, and this is already affecting the earnings of car manufacturers.
“But for some drivers, it just doesn’t make sense to switch because they don’t have charging options at home or feel the current charging infrastructure where they drive isn’t up to scratch.”
Luton is one of two major factories that Stellantis owns in the UK, the other being in Ellesmere Port. The Ellesmere Port site specializes in smaller vans such as the Vauxhall Combo after it stopped making the Astra car in 2021. Van manufacturing will now be carried out exclusively at the Ellesmere Port site, where Stellantis hopes to relocate many of the Luton jobs.
The factories export their vehicles under the Opel brand around Europe, as well as manufacturing vehicles under the Citroen and Peugeot brands owned by Stellantis.
Last month, Stellantis said sales fell 27 percent, or €12 billion. in the three months to the end of September compared to a year earlier.
The company is a product of the merger of several major brands, including Citroen, Peugeot, Chrysler and Fiat.
It competes with other giants such as Volkswagen and Toyota.
A government spokesman said: “We have a long-standing partnership with Stellantis and we will continue to work closely with them, as well as unions and local partners on the next steps of their proposals.
“The Government is also backing the wider industry with over £300m to promote the take-up of zero-emission vehicles and £2bn to support the transition to domestic production.”
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