Vauxhall has become the latest carmaker to announce job cuts and scaled back production, with its parent company Stellantis blaming government rules which aim to quicken the transition to EVs. The multinational automotive company is set to close its historic Luton factory, the home of the iconic ‘Luton van’ with the potential loss of more than 1,000 British jobs.

News of the plans resulted in billions being wiped off the automaker’s share price and its CEO, Carlos Tavares, resigning just days after the announcement. Stellantis’s UK operations appear to have been thrown into turmoil by government plans which would fine vehicle manufacturers who fail to meet a 2030 ban on the production of petrol and diesel cars. Carmakers in the EU, UK and the US are facing difficulty, with many pointing the finger at EV regulations. But are they right to do so, and are Ev regulations killing the car industry?

Vauxhall announces closure of its Luton plant

In November, workers at Vauxhall’s historic Luton plant were left shocked after the carmaker announced it would be closing the plant. The automaker said government regulations around the transition to EVs were partly the blame.

The BBC reports that the news comes amid growing concern from the automotive industry around the transition to EVs, saying there is insufficient consumer demand for battery-powered cars. Speaking to the outlet, the Society of Motor Manufacturers and Traders said weak demand for EVs would cost British car manufacturers £6 billion this year.

In October the bosses of 13 car manufacturers wrote to the Chancellor, Rachel Reeves, calling for incentives to kickstart the stalling EV market. Big firms including BMW and Ford told the government that ‘mandates don’t make markets’ and called for consumers to be helped to buy the EVs which automakers are being asked to build.

Car companies are being told that by 2030 80 per cent of cars and vans sold in the UK must be electric, rising to 100 per cent by 2035, or they will face enormous fines. But industry leaders believe the plans are unrealistic without government support, and say they will result in job losses.

In the UK just 4 per cent of cars are electric, and across the EU, where similar mandates are being implemented, just 4.5 million out of 255 million cars are all electric. With deadlines looming and the threat of fines hanging over automakers, many are now opting to reduce the scale of their operations rather than suffer financial penalties.

A potential trade war between the West and China, which produces among the world’s cheapest EVs, means prices are unlikely to fall substantially any time soon – and the task of installing the necessary infrastructure remains both herculean in scope and uneconomical commercially.

However, despite the very real challenges posed by blunt decarbonisation laws, there could be other factors in play. A trade union representing workers at the plant accused the outgoing Stellantis CEO of ‘aggressive cost-cutting and profiteering.’ Responding to the exit of Carlos Tavares, a spokesperson for Unite the Union said:

“The plant is highly profitable and is ready to begin production of the electric Vivaro van from 2025 after workers met every manufacturing cost target asked of them by Tavares, without impacting jobs, pay or conditions.

“Carlos Tavares resigned a year earlier than expected after his years long strategy of aggressive cost cutting and profiteering led the company into crisis. The planned closure of Luton is one final example of Tavares’ failed strategy and must be halted as the company embarks on the hunt for a new CEO and a new direction.”

That criticism echoes concerns levelled at Tavares by American Stellantis dealers who penned a scathing open letter earlier this year in which they accused the then CEO of leading the firm toward ‘disaster’ amid what they characterised as “rampant layoffs.”

Tavares has repeatedly attacked EV mandates and in April warned they could result in ‘the death’ of the domestic car industry. While there is no doubt EV mandates represent a challenge – maybe even an insurmountable one – questions abound over how good a job the Stellantis CEO did to navigate the storm.

Will EV mandates make carmakers go bust?

Vauxhall are far from the only carmaker complaining of, and suffering from, regulations which will force them to phase out the production of petrol and diesel engine vehicles. Last month crisis-hit Nissan urged the UK government to relax the mandate, citing weak demand for EVs.

Following the news of the closure of Vauxhall’s Luton plant, the British economist Liam Halligan said the government must scrap its EV mandate to save the industry from going bust. In a December article for The Telegraph, he said:

“Car manufacturers have absorbed £4bn of EV discounts, but still face £1.8bn in fines – a “compliance bill” of almost £6bn this year alone. These are simply ruinous sums for the UK-based car industry, while still employing around a million people, often providing well-paid jobs in parts of the country – like Luton – where well-paid jobs are scarce.

“So while Europe’s car industry as a whole is suffering from low EV take-up, the UK-based part is suffering a whole lot more – all in the name of “global environmental leadership”. Britain is uniquely vulnerable – these idiotic policies will soon hand vast swathes of our car market to massively subsidised EVs made in China, which already account for around 60pc of global production.

“Britain’s net zero policies – particularly those relating to EVs – are a fiasco, now costing serious jobs and threatening entire regional economies. This is what happens when politicians think they know best – putting vanity and ideology above economic and commercial logic.”

In November Ford announced it would cut 800 jobs in the UK, with The Guardian reporting that automotive companies were ramping up their efforts to lobby the government to relax its transition rules. Speaking to the outlet, David Bailey, professor of business economics at the University of Birmingham described the rules as ‘severe’ and said he thought firms would ‘struggle’ to avoid fines.

What impact will EV mandates have on the car industry?

Industry has complained – not without reason – that EV mandates are overly punitive, being imposed too quickly, and without the necessary support. The fines for non-compliance, combined with the high costs of retooling factories, ramping up EV production, and addressing consumer hesitancy, represent significant hurdles to transition.

Consumer demand continues to be a sticking point. The current slow adoption of EVs, driven by high prices, limited infrastructure, and consumer hesitancy underscores the importance of aligning mandates with market realities. Without greater government support, such as incentives to make EVs more affordable and accessible, the industry will continue to suffer a mismatch between supply and demand.

However, it is likely governments will fold before automakers – driven to do so by the threat of job losses and stifled economic activity which their voters will not abide. If they fail to reverse course, then while carmakers may not face complete collapse, we can expect more plants to be shuttered and more workers to be laid off.