The owner of Vauxhall has announced plans to close its van-making factory in Luton, putting about 1,100 jobs at risk.

Stellantis, which also owns brands including Citroen, Peugeot and Fiat, said it would combine its electric van production at its other UK plant in Ellesmere Port.

Rules imposed to speed up the transition to electric vehicles (EV) in the UK partly drove the decision, the company said.

It comes amid growing concerns among car manufacturers over EV sales targets, with many, including Stellantis, calling for the government to do more to boost consumer demand.

In response to the announcement, the government said while it was “encouraging to see Stellantis investing in the future of its Ellesmere Port plant, we know this will be a concerning time for the families of employees at Luton who may be affected”.

As part of the shift to electric, manufacturers are required to sell a certain percentage of cars and vans that emit zero emissions.

Current rules state EVs must make up 22% of a carmaker’s car sales, and 10% of van sales this year.

For every sale that pushes it outside the mandate, firms must pay a £15,000 fine. There are flexibilities in the system, allowing manufacturers who cannot meet the targets to buy “credits” from those that can.

Car brands with factories in the UK have been urging the government to relax the rules, arguing that EV demand is not strong enough and more incentives are required for drivers to go fully electric.

Following the intense pressure from industry, Business Secretary Jonathan Reynolds is expected to announce a consultation on the rules later on Tuesday.

Stellantis’s Vauxhall Luton plant currently builds petrol and diesel vans and had been due to start making its medium-sized Vivaro Electric van from 2025, before the decision to close it.

Electric models from other Stellantis brands, including Citroën, Peugeot and Fiat, were also set to be built there.

Now, the electric model that had been scheduled for manufacturing at Luton will move to Ellesmere Port, which is to get a £50m cash injection.

Three years ago, Stellantis invested £100m into revamping the Ellesmere Port site to make electric vehicles. It currently builds a range of small electric vans.

Production of Stellantis’s conventional vans will be transferred to France

The company said the closure of Luton in spring next year would “potentially contribute to greater production efficiency”. The decision to consolidate production is subject to consultation.

It said hundreds of permanent jobs would be created at Ellesmere Port and that it would provide relocation assistance to workers who wanted to transfer from Luton.

Earlier this year, Stellantis’ chief executive Carlos Tavares warned that the future of both Luton and the company’s Ellesmere Port plant in Cheshire were in doubt.

In July, he announced a review of the future of both plants, citing the impact of the EV sales mandate.

The car industry as a whole has been repeatedly demanding the government provide better incentives for people to buy electric, ahead of the ban sales of new petrol and diesel vehicles commencing in 2030.

Nissan, which builds EVs at its plant in Sunderland, has said the rules are “undermining the business case for manufacturing cars in the UK, and the viability of thousands of jobs and billions of pounds in investment”.

Last week, its rival Ford announced it will cut 800 jobs in the UK over the next three years. It said this was partly because of weaker demand for EVs.

The Society of Motor Manufacturers and Traders (SMMT) has previously said support packages are needed to make the electric vehicles switch more attractive and affordable.

Sales of electric cars have been increasing – in October, they made up nearly one out of every four cars registered. However, industry sources insist this is largely down to unsustainable discounting.

The SMMT said Stellantis’s announcement was a “major concern to UK automotive manufacturing but, most importantly, to the livelihoods of many”.

“It is also a sobering reminder of the challenge and cost this industry faces in developing new EV technologies and transitioning a market that is not yet fully ready,” it added.

“The UK situation is particularly acute with arguably the toughest targets and most accelerated timeline in the world, yet without the consumer incentives that would drive the necessary demand.”

The government said it was backing the car industry with more than £300m to “drive uptake of zero emission vehicles”.