Will Net-Zero Fines Force Vauxhall to Shut EU Factories?
Stellantis, the carmaker behind Vauxhall, Citroen, Peugeot and Fiat, has said it may be forced to shut factories across Europe if it cannot meet strict EU carbon emissions rules.
As reported by The Telegraph, Jean-Philippe Imparato, Stellantis’s Chief Operating Officer in Europe, warned that, without changes this year, the firm will have to make “tough decisions”.
Speaking at a press event in Italy, Jean-Philippe told reporters: “I have two solutions: either I push like hell [on electric] ... or I close down ICE,” referring to internal combustion engine vehicles like diesel-powered cars, “And, therefore, I close down factories.”
The European Union’s emissions rules are based on average carbon output from 2025 to 2027.
To comply, carmakers must significantly boost sales of EVs or face heavy fines. Stellantis could be hit with penalties of up to €2.5bn (US$2.7bn) over the next two to three years if it fails to meet the targets.
Jean-Philippe dismissed the rules as “unreachable” and warned that, unless sales of EVs can be doubled, cuts to ICE production will be the only way forward.
Stellantis currently operates more than 50 factories globally, including around 20 in Europe. Although Jean-Philippe did not confirm which sites may face closure, he mentioned the Atessa van plant in Italy during his remarks.
The Telegraph also notes that the company’s Luton van plant has already closed earlier this year. That leaves Ellesmere Port, near Liverpool, as Stellantis’s only operational vehicle assembly site in the UK.
The plant is currently undergoing upgrades to shift to EV-only production, with electric van output expected to begin late next year. A Stellantis spokesperson declined to say whether Ellesmere Port was also at risk but confirmed substantial investment had been made.
UK net-zero targets prompt relocation threat
Stellantis has also issued warnings about its future in the UK.
In a previous 2024 report by The Sun, the company said it might halt production in the UK altogether if “impossible” net zero targets go ahead.
The UK currently requires that 22% of all new car sales be zero-emission in 2024, rising to 80% by 2030. Labour has backed plans to bring forward the ban on new petrol and diesel vehicle sales from 2035 to 2030.
Maria Grazia Davino, former Managing Director at Stellantis UK, said then: “Stellantis UK does not stop, but Stellantis production in the UK could stop.”
The warning puts up to 2,500 jobs at risk across Luton, Ellesmere Port and throughout Stellantis’ UK supply chain.
Maria said the company might be forced to heavily discount EVs just to drive enough sales and avoid fines, which could reach as much as £15,000 per vehicle.
She questioned the investment climate in Britain: “You have to ask why should I continue investing in this country that has these negative results?”
She added that a decision from the next government would be expected within the year, or else Stellantis would “enter an evaluation of producing elsewhere".
Industry calls for better business environment
Meanwhile, the Society of Motor Manufacturers and Traders (SMMT) has said that, without wider government support, investment in the British car industry is at risk.
Quoted by The Telegraph, SMMT Chief Executive Mike Hawes said: “Electricity costs remain, as we speak, the highest in the world. Internationally, we’re worst for business rates, amongst the worst for the burden of government regulation.”
Mike urged the UK Government to act, saying: “We need a compelling offer that redefines the UK’s appeal as a place to invest.”
The government has responded by including automotive production in its industrial strategy.
Business Secretary Jonathan Reynolds states: “Our collective job is to bring more investment, more product lines and more jobs here.”
Europe prepares carbon compensation plan
In a related development, the European Commission this week confirmed it will offer compensation to industries at risk of losing competitiveness because of carbon costs.
EU Climate Commissioner Wopke Hoekstra explains that the plan is aimed at firms that export goods to markets where competitors don’t pay for emissions.
Wopke adds the system is expected to offer €70m (US$82m) in compensation next year, with funds coming from the EU’s carbon border tariff. That tariff, set to be fully in place by 2030, is projected to raise €2.1bn in revenue.
The policy responds to concerns from heavy industries like aluminium and steel, which face the phase-out of free carbon permits. Companies will have to buy additional permits on the EU carbon market, adding costs that may make European firms less competitive abroad.
He says: “We’re doing this specifically for those companies at the risk of losing out because they are exporting.”
He also explains the scheme would be tightly controlled: “We want to make absolutely sure that this system is not going to be manipulated or exploited by actors from outside of the European Union.”
As carbon rules tighten across Europe and the UK, the pressure on supply chains, factory jobs and long-term investment only grows.
