How Supply Chain Constraints are Affecting EV Manufacturing
Stellantis, the automotive giant behind Vauxhall, Peugeot, Fiat and Citroën, has announced a decision that will reverberate through the UK's manufacturing sector. The company plans to close its Luton van manufacturing plant in April next year, ending over a century of production in the area.
First established in 1905, the Luton site has long been integral to Vauxhall’s legacy, producing commercial vehicles since 1932. The closure will mark a significant blow to the local economy and further diminish the UK's shrinking manufacturing base.
The move comes as Stellantis faces mounting challenges tied to stringent UK government EV sales targets, set under the Zero Emission Vehicle (ZEV) mandate.
These regulations aim to accelerate electrification but have sparked controversy across the automotive sector. To consolidate its efforts, Stellantis plans to focus production at Ellesmere Port, its EV-only manufacturing plant in Cheshire.
A Strategic Shift to Ellesmere Port
Ellesmere Port represents Stellantis's commitment to electrification, having received a £100m investment to convert it into the UK’s first EV-only factory.
The facility currently produces smaller electric vans such as the Vauxhall Combo Electric and Citroën e-Berlingo. An additional £50m is earmarked to increase production capacity further.
Stellantis’s decision to centralise operations at Ellesmere Port reflects the need to optimise resources as the EV market continues to grow at an uneven pace.
However, the closure of Luton raises questions about the feasibility of current EV targets given market demand.
The Growing Debate Around EV Targets
The UK’s ZEV Mandate requires EVs to account for 22% of all vehicle sales by 2024, rising to 28% in 2025. Yet, the Society of Motor Manufacturers and Traders (SMMT) forecasts that EV sales will only reach 18.5% next year, even with significant discounts offered by manufacturers.
Since the mandate became law in January, carmakers have faced immense pressure to meet these benchmarks or risk heavy fines. This challenge isn’t unique to Stellantis; global manufacturers like Toyota are also grappling with the pace of transition.
Toyota, for instance, has been slower to adopt battery electric vehicles (BEVs) than competitors such as BYD and Tesla. Although it has ramped up EV production with models like the bZ4X and invested heavily in battery technologies, sales have lagged behind expectations. In October, Toyota postponed its US EV plans to 2026 due to sluggish demand, reflecting a broader issue across the industry.
Many manufacturers argue that the ZEV targets are overly ambitious and out of sync with market conditions.
Calls for Flexibility and Reform
The automotive industry is pushing for regulatory reforms to address these challenges. Nissan has proposed two key adjustments to the ZEV Mandate:
- Increased flexibility: Allowing manufacturers to borrow credits from future years to meet immediate targets.
- A two-year monitoring period: Temporarily suspending penalties for 2024–2025 to evaluate market trends and adapt strategies accordingly.
Guillaume Cartier, Chairperson for Nissan’s AMIEO region, emphasises the urgency of these reforms. “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.
"We need urgent action from the Government by the end of the year to avoid a potentially irreversible impact on the UK automotive sector.”
BMW’s CEO, Oliver Zipse, has also expressed concerns, suggesting the 2035 petrol car ban is unrealistic.
“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."
In Japan, a group of manufacturers, including Toyota, Subaru and Mazda, is championing the Multi-Pathway concept. This approach supports electrification alongside other technologies, such as carbon-neutral fuels and hybrid solutions, to broaden options for both manufacturers and consumers.
“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, CEO of Subaru.
“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.”
Understanding the Challenges
The difficulties in meeting EV mandates stem from multiple factors, including supply chain constraints, technological hurdles and market readiness.
Raw materials like lithium, cobalt and nickel, essential for EV batteries, are in limited supply. Geopolitical and environmental concerns further complicate their procurement. At the same time, manufacturers are investing heavily in EV research, new production facilities and the development of scalable EV platforms, all while maintaining traditional internal combustion engine (ICE) production.
Technological barriers such as battery performance, charging infrastructure and thermal management add to the complexity. Many global markets also lack the charging networks and reliable electricity grids needed to support widespread EV adoption, slowing consumer demand.
This disconnect between regulatory targets and real-world conditions underscores the need for a more collaborative approach to electrification.
A Paradigm Shift in Automotive Manufacturing
The closure of Stellantis’s Luton plant reflects broader challenges in the EV transition. Meeting ZEV mandates isn’t just about scaling up production—it demands systemic changes across supply chains, technologies and consumer behaviour.
Manufacturers have shown a strong commitment to electrification, evidenced by their substantial investments in EV innovation and infrastructure. However, regulatory targets must be realistic and aligned with market conditions to ensure a sustainable and effective transition.
Policymakers should consider a more flexible approach, such as the Multi-Pathway concept, to support broader adoption of alternative technologies while easing the pressure on manufacturers.
As Guillaume puts it: “The knowledge and applications found demonstrate that full circularity is feasible, and as a business, this is critical to our transition.”
To truly achieve a zero-emission future, collaboration between governments, manufacturers and infrastructure developers will be key. This transition must be guided by both ambition and pragmatism to build a sustainable automotive industry for the future.
Explore the latest edition of Procurement Magazine and be part of the conversation at our global conference series, Procurement & Supply Chain LIVE.
Discover all our upcoming events and secure your tickets today.
Procurement Magazine is a BizClik brand
