Vauxhall owner Stellantis has begun a strategic review of its two van-making plants in the UK with a view to possibly shutting them for good, CEO Carlos Tavares said.

Stellantis is threatening to close the Ellesmere Port and Luton facilities as part of a battle with the UK government over its opposition to the ZEV mandate, which is designed to boost electric vehicles sales.

“The ZEV mandate is hurting significantly our business model and this is triggering a strategic review of our business model, including the manufacturing footprint,” Tavares told analysts on the company’s earnings call last week.

Tavares said the company was in the middle of “an intensive and productive dialogue” with the government over the mandate. “So far, we don't have the answers we need,” he added.

The CEO’s comments escalate Stellantis’s attack on the mandate, which forces brands to increase EV sales to 22% of their total UK new car sales this year. Companies can reduce that target via a series of loopholes, but failure brings a penalty of £15,000 for every combustion-engined car sold over the threshold.

Stellantis has vocally opposed the target, which it says is not matched by demand. In June, the company’s UK head, Maria Grazia Davino, first raised the possibility that Stellantis could end van production over the issue. 

Tavares’s latest comments raise the stakes further for the new Labour government, which is facing its first threat from a car maker to close a key manufacturing facility if specific conditions are not met.

Stellantis currently builds compact electric vans for its brands, including Peugeot and Citroën, in Ellesmere Port, near Liverpool, and mid-sized combustion-engined vans in Luton, north of London. 

Stellantis has promised to build electric versions of its mid-sized van range at its Luton plant from next year.

“We cannot be making these in the UK and being the victims of the ZEV mandate. This is a contradiction that the company cannot accept,” Tavares said.

The threat is a credible one, David Bailey, professor of business economics at the Birmingham Business School, told Autocar recently. “Stellantis is unfortunately a foot-loose multinational with considerable capacity across Europe. They can switch production if they want to.”

The UK has struggled to remain competitive on cost compared with other manufacturing locations in southern and eastern Europe. Stellantis is preparing to produce the same K0 van range as built at Luton at a refitted plant in Turkey run in partnership with Koc Holdings from 2025.

Meanwhile, Stellantis will start producing the same Citroën ë-Berlingo, Peugeot e-Partner, Opel Combo-e and Fiat e-Doblo as Ellesmere Port at its Mangualde plant in Portugal, also from 2025. 

If it carries out its threat, Stellantis would be walking away from a £100 million investment in Ellesmere Port to refit the facility to build vans from the Vauxhall Astra. The upgrade included a reported £30m injection from the government. Luton, meanwhile, was given a £100m upgrade in 2019.