European carmakers faced a turbulent day on Tuesday as shares fell across the sector in response to President-elect Donald Trump’s sweeping tariff announcement, Stellantis revealed plans to close its historic Luton plant, and frustrations emerged over stringent EU emissions mandates.
Trump’s tariffs threaten supply chains
Trump’s pledge to impose a 25% tariff on imports from Mexico and Canada, along with a 10% tariff on Chinese goods, has sent shockwaves through the global automotive industry. Mexico, a major hub for vehicle production, exported 1.57 million vehicles to the US between January and July this year, with many of these vehicles manufactured by European carmakers.
Stellantis and Volkswagen are among the most exposed to the proposed tariffs. Stellantis relies on Mexico for 30% of its North American sales, producing high-margin vehicles like Ram pickups and Jeep Compass SUVs at its Saltillo and Toluca plants. Analysts estimate that the tariffs could reduce Stellantis’ pre-tax profits by over €3.6bn if fully implemented. Volkswagen, which imports 41% of its US vehicle volumes from its Puebla factory, would face significant cost increases for models like the Jetta and Tiguan.
The tariffs also threaten to disrupt integrated supply chains. The US imports nearly four times more car parts from Mexico than from Europe, meaning the automotive sector could face widespread production delays and cost increases. While some manufacturers may shift production to the US to mitigate the impact, such a move would require significant investment during an already challenging market downturn.
Stellantis closes Luton plant amid EV push
In the UK, Stellantis announced plans to shut its Luton van plant in April 2025, putting 1,100 jobs at risk. The closure marks the end of 120 years of vehicle production in Luton, a decision driven largely by the UK’s Zero Emission Vehicle (ZEV) mandate. The mandate requires 22% of all new vehicle sales to be electric in 2024, rising to 80% by 2030, with non-compliance fines of £15,000 per vehicle. Stellantis cited these pressures as central to its decision.
The company plans to consolidate operations at its Ellesmere Port facility, the UK’s first battery-electric-only manufacturing site, where it is investing £50m to expand production of medium-sized electric vans. While hundreds of Luton workers may be relocated, unions and local leaders have condemned the decision, describing it as a “slap in the face” for the community. Stellantis’ move reflects a broader trend of automakers scaling back operations under financial strain, with Ford and Volkswagen also announcing job cuts and plant closures.
Scholz opposes EU fines amid growing industry challenges
German Chancellor Olaf Scholz has criticized EU emissions fines that penalise carmakers for failing to meet net-zero targets. Under current EU rules, manufacturers must reduce emissions by 15% by 2025, rising to 55% by 2030, with penalties of €95 per gram of CO over the limit per vehicle. Scholz argued that these funds would be better reinvested in modernising production to meet emissions targets.
The automotive sector, representing 5% of Germany’s GDP, has voiced mounting frustration with the fines, which come amid faltering consumer demand for electric vehicles (EVs). In the UK, BEVs accounted for just 18.1% of new car sales as of October, well below the 22% target for 2024. Stellantis and other manufacturers have lobbied for greater flexibility in emissions targets, warning that failure to adapt regulations could lead to further closures and job losses.