Stellantis Shelved U.K. Auto Investment Over Combustion Ban

(Bloomberg) -- Stellantis NV Chief Executive Officer Carlos Tavares was ready to bolster the company's Ellesmere Port car factory in England with fresh investments. Then the U.K. government said it would ban combustion-engine vehicles from 2030.

The announcement in November forced the manufacturer to abandon a project earmarked for the plant even as the U.K. and the European Union struck a favorable trade deal the following month, Tavares said. The CEO is now locked in talks with U.K. authorities over the future of the site that employs 1,000 and makes Opel and Vauxhall cars.

After Prime Minister Boris Johnson's “brutal announcement, we immediately suspended the decision on that project,” Tavares said during an earnings call Wednesday. “We are not going to invest in the U.K. market on a product that is going to be banned from 2030 onwards.”

Ellesmere Port has emerged as an early test case for the U.K.'s carmaking prospects after the trade agreement reached in December. The CEO's comments on whether the company will revamp the site near Liverpool or phase out production highlight the pressure on Johnson's government to reach a deal to safeguard the factory and avoid it becoming a post-Brexit manufacturing casualty.

Figures published Thursday revealed the extent of the industry slump in the country, with auto sales falling about 36% last month to the worst February total in six decades.

Business Secretary Kwasi Kwarteng on Monday told parliament that the government is “committed to ensuring the future of manufacturing” at the site and is also trying to develop a local battery-making industry.

To comply with the combustion-engine ban, Stellantis would have to overhaul the plant to make fully electric cars -- products Tavares said are already produced elsewhere.

“Why would we double the sourcing in Europe for the same kind of products in the situation where we are able to meet all the requirements of the Brexit deal?” he asked rhetorically. Any spending on Ellesmere Port for local output would only be made “with the support of the U.K. government,” he said.

“We have discussions with the U.K. government, they are collaborative, productive, open minded, but this is a business,” Tavares said. Stellantis won't invest “if it doesn't make economic sense.”

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