When you arrive by train in Wolfsburg, Lower Saxony, the first thing you see is the Volkswagen factory. Its huge facade, emblazoned with a giant VW logo and flanked by four tall chimneys, dominates one bank of the canal that runs through the city. The 6.5 sq km (2.5 sq mile) complex sits adjacent to the Autostadt, a kind of theme park devoted to the automobile and to VW, Europe’s biggest carmaker. The Volkswagen Arena, a sports stadium, is a short distance away.

Wolfsburg is Germany’s answer to mid-20th Century Detroit – not so much a city with a car factory as a factory with a city that has grown up around it. Some 60,000 people from across the region work in the plant, while the town itself has a population of around 125,000. Locals say that even if you don’t work in the factory yourself, it’s certain many of your friends will, along with half of your class from school.

“Wolfsburg and Volkswagen – it’s kind of a synonym,” explains Dieter Landenberger, the VW Group’s in-house historian, as he looks lovingly at an early model Beetle. It is one of an array of beautifully restored classic cars in the Zeithaus – a huge, glass-fronted museum in the Autostadt dedicated to icons of the motor industry.

“We’re proud of the plant,” he says. “It is a symbol of that period in the 1950s when Germany had to reinvent itself and rebuild after the war. It was a kind of motor for the German economic miracle.”

Today, however, the plant has also come to symbolise some of the main problems affecting the German car industry as a whole. The Wolfsburg factory is capable of building 870,000 cars a year. But by 2023 it was making just 490,000, according to the Cologne-based German Economic Institute. And in Germany it is far from alone. Car factories across the country have been operating well below their maximum capacity. The number of cars produced in Germany declined from 5.65m in 2017 to 4.1m in 2023, according to the International Organisation of Motor Vehicle Manufacturers.

All of this matters deeply as the German public prepares to go to the polls on 23 February. The car industry is not just a source of national pride; it is also a significant driver of national wealth. Disagreements over how to resolve the country’s economic malaise were a factor in the collapse of the coalition government in November. Whoever is in power after the election will inevitably need a plan to revive the economy – and getting the motor industry back in gear is likely to play an important role.

Car-making makes up about a fifth of the country’s manufacturing output, and if the supply chain is taken into account, it generates around 6% of GDP, according to Capital Economics. The industry employs some 780,000 people directly – and supports millions of other jobs.

It’s not just production that is down. Sales of cars made by German brands are far lower than they were just a few years ago. Between 2017 and 2023, those of VW fell from 10.7m to 9.2m, while over the same period BMW’s went from 2.46m to 2.25m and Mercedes-Benz’s went from 2.3m to 2.04m, company reports show.

All of the Big Three saw their pre-tax profits fall by about a third in the first nine months of 2024, and each warned that their earnings for the year as a whole would be lower than previously forecast.

The development of electric cars has sucked up huge investment, but the market for them hasn’t grown as quickly as expected, while foreign competitors are flexing their muscles. The threat of tariffs being imposed by the US and other governments also looms large.

“There are so many crises, a whole world of crises. When one crisis is over, another is coming up,” is how Simon Shütz, a spokesman for the German Automotive Industry Federation (VDA) puts it.

Car sales across Europe have been declining since 2017, according to Franziska Palmas, a senior Europe economist at Capital Economics. “Lately they’ve recovered a bit, but they’re still around 15 to 20% lower than they were at the peak in 2017,” she says. “That’s partly due to factors like the pandemic, the energy crisis. But it’s also cars lasting longer – and people already have a lot of cars in Europe. So demand has been weak.”

Another key factor has been the aforementioned transition to electric cars. Since the diesel emissions scandal of 2015 – in which VW was found to have rigged emissions tests in the US – the industry has been undergoing a technological revolution.

With the EU and European governments determined to phase out petrol and diesel cars over the next decade, manufacturers have had little choice but to invest tens, and collectively hundreds of billions of Euros on developing electric models and building new production lines.

However, although electric cars do now make up a significant share of all cars sold – 13.6% in the EU and 19.6% in the UK last year, for example – their market share has not been growing as quickly as anticipated.

And in Germany itself, the sudden removal of generous subsidies for electric car buyers in late 2023 actually contributed to a dramatic 27% fall in sales of all electric cars within the country last year, making life still more difficult for German firms in their home market.

“The decision to drop subsidies suddenly – that was very bad, because it undermined trust among our customers,” says the VDA’s Simon Schütz.

“Going from the combustion engine to electric mobility is very big process. We are investing billions in rebuilding all the factories. And so that takes some time, there’s no question about it.”

While all of this has been going on, German manufacturers have also been grappling with another serious concern. Doing business in Germany itself, operating factories here and employing hundreds of thousands of people, is very expensive.

Workers in the automotive sector have traditionally enjoyed generous pay and benefits thanks to agreements drawn up between unions and management. According to Capital Economics, in 2023 the average monthly base salary in the German auto industry was about €5,300, compared with €4,300 across the German economy as a whole.

For years, this approach gave German-based companies certain advantages, for example in avoiding industrial unrest and in attracting and retaining talented staff. However, it also led to German car manufacturers having the highest labour costs in the global industry. In 2023, these averaged €62 per hour, compared to €29 in Spain and €20 in Portugal, according to the VDA.

The situation for Germany’s domestic car industry became more acute following Russia’s invasion of Ukraine. This choked off Germany’s once-abundant supplies of cheap Russian gas, at the very time when the country was phasing out nuclear power.

The result was a sharp increase in energy prices. Although they have since subsided, energy costs for industrial users in Germany remain very high by international standards. “Energy prices here are three to five times higher than in the US, or in China – much higher than for our main competitors,” says Mr Schütz.

And this is being felt across the industry, not just at the carmakers themselves. “From the Thysenkrupp and Salzgitter steel mills producing the sheet metal rolls that are later turned into doors and bonnets, to makers of smaller components used in drivetrains, costs have exploded as a result of high energy prices,” says Matthias Schmidt of Schmidt Automotive Research.

Last year these pressures came to a head. At VW, which has 45% of its global staff in Germany, managers finally decided radical action was needed to bring down costs.

“It was a very big shock,” IG Metall union spokesman Steffen Schmidt tells me over a cup of coffee near the VW factory in Wolfsburg. “The company didn’t say anything publicly.”

It was left to Daniela Cavallo, head of the powerful VW works council and the top employees’ representative, to deliver the news. “They held a big meeting outside the gates of the factory. Thousands of workers – and you could have heard a pin drop,” says Mr Schmidt.

“They were stunned. Thousands of people, all completely silent.”

What VW proposed was unprecedented. Union representatives had come to meetings expecting to negotiate an annual pay rise. They were asking for a 7% boost. Instead, they were told, the company needed them to take a 10% pay cut.

Worse was to follow. The company said it might have to close up to three of its factories within Germany itself – and was tearing up a job security agreement that had been in place for decades.

Arne Meiswinkel, VW’s chief negotiator, said at the time that the situation it faced in Germany was “very serious” and that “Volkswagen will only be able to prevail if we future-proof the company now in the face of rising costs and the massive increase in competition”.

Volkswagen had never previously closed a German factory in its 87-year history. In the face of intense opposition from unions and politicians, and following short but disruptive “warning strikes” by unionised workers, the idea was ultimately shelved. But the very fact it had been put forward sent a seismic shock through the entire sector.

In the meantime, the workforce did agree to painful limits on pay and bonuses, and VW said it would cut more than 35,000 jobs by the end of the decade, albeit in a “socially responsible manner” that avoided compulsory redundancies.

Less conspicuously, Mercedes-Benz also launched a cost-cutting drive last year, aimed at saving several billion euros annually – albeit compulsory redundancies in the German workforce are highly unlikely, as a job security agreement effectively rules them out until 2030. Meanwhile Ford, which operates two factories in Germany, recently announced plans to cut 2,800 jobs in the country.

Not all of the German car industry’s problems are confined to Germany itself. With the European market saturated, for several decades the continent’s manufacturers have looked for growth elsewhere.

One of the most lucrative markets has been China, where for a while the growing middle class had an apparently insatiable appetite for upmarket European vehicles. VW, Mercedes-Benz and BMW all teamed up with local businesses, setting up factories in China itself to meet local demand.

But now that source of growth is drying up. The Big Three have all seen sales fall recently – in 2023 VW’s China sales were down 9.5% on the previous year, Mercedes-Benz’s by 7% and BMW’s by 13.4%. Their combined share of the Chinese market has shrunk as well to 18.7%, from a peak of 26.2% in 2019. This appears to be the result of a slowing Chinese economy, falling interest in expensive, foreign-badged cars and the rapid growth of local marques, especially in the electric car market.

“Not that long ago, Western brands represented quality and trust,” explains Mark Rainford, founder of the Inside China Auto website. However, he says, since then the reputation and appeal of Chinese brands has improved beyond recognition.

All of the Big Three say trends in China have had a significant impact on their earnings.

Chinese brands are also attempting to build a share of the European market, helped by their much lower operating costs than more established rivals, both because wages are lower in China and because, as pure EV firms, they don’t have the same legacy costs carried by manufacturers making the transition from petrol and diesel to battery-powered cars.

According to the European Commission, Chinese brands also benefit from hefty government subsidies, which allow them to sell cars at artificially low prices. In October, the EU introduced extra tariffs on imports of Chinese-made EVs, in an effort to create a more level playing field.

German firms opposed the EU tariffs, because they feared retaliation from China could affect their own exports. Now they also face the threat of new protectionist measures being introduced by the Trump administration, including possible tariffs on cars shipped from the EU. For an industry that relies heavily on exports, the rise of protectionism is a growing threat.

“We know that trade wars only create losers on both sides. Tariffs will cost wealth, cost growth and cost jobs,” says the VDA’s Simon Schütz.

Although some of the pressures facing Germany’s car companies were not foreseeable, there was still an element of complacency, believes analyst Matthias Schmidt: “They knew the structural issues were there, but were blindsided by cheap Russian gas,” he says.

“The expansion to China and the high profits being shipped back to Europe plastered over the high labour cost issues, giving unions a joker card to play with.

“Germany has effectively been an export-driven market, and once those markets sneeze, Germany catches a cold, which is what’s happened.”

So can Germany’s carmakers revive their fortunes? It is a vital question for the manufacturers, for their networks of suppliers and for the country as a whole.

“The problem for Germany is we are not competitive,” says Dr Ferdinand Dudenhöffer, head of the Bochum-based Center for Automotive Research. “Not just in cost terms, but also in terms of the new technologies which will run the world in future”.

He thinks China has become the centre of gravity for innovation in areas such as digitisation and battery technology. “The solution for the carmakers and for the suppliers, in my view, will be that they take their factories abroad,” he says

Simon Schütz is more optimistic. He thinks the industry can prosper, but only if it gets the support it needs from the government after the elections later this month.

“Our automotive industry will be world-leading, I am sure of that,” he says.

“The question is, where will the future jobs be? Will they be in Germany, because we can build cars here, or will our companies go elsewhere?’

For union rep Steffen Schmidt, however, the solution is to go back to Germany’s traditional industrial values. “We have to become a leader in innovation and technology again,” he says. “Then we can keep high pay and good conditions for workers.”

He thinks the path ahead for the new government is very clear: “Invest, invest, invest. In infrastructure, in technology, in green energy and in education.”

For tens of thousands of workers in Wolfsburg, and in Germany’s other “car towns” such as Ingolstadt, Weissach, Munich, Stuttgart and Zwickau, the stakes could not be higher.

The announcement by the White House came even as Trump continued to blast Canada for not doing enough to stop drugs from entering the US.

“Nothing has convinced me that it has stopped,” Trump wrote on social mediaafter a phone call with Canadian Prime Minister Justin Trudeau about the economic disruption caused by new trade tariffs.

News of the relief helped to boost US shares, which closed higherafter two days of declines that had wiped out gains the S&P 500 had seen since the presidential election in November.

The tariff exemption is for cars made in North America that comply with the continent’s existing free trade agreement.

That deal, which was negotiated by Trump during his first term, sets out rules for how much of a car must be made in each country to qualify for duty-free treatment.

White House press secretary Karoline Leavitt said Trump had backed a one-month exemption to the tariffs for the car industry after pleas from Ford, General Motors and Stellantis, which have supply chains that stretch across North America.

The new tariffs – which are a tax applied as goods enter the country – were poised to disrupt a third of car production in North America within a week, according to analysts at S&P Global Mobility.

Shares in Ford were up by more than 5% after the announcement, while General Motors shares rose more than 7%.Stellantis shares in the US rose more than 9%.

“The president is open to hearing about additional exemptions,” Ms Leavitt added. “He always has open dialogue and he’ll always do what he believes is right for the American people.”

Ford said in a statement the company will continue to have a “healthy and candid dialogue with the administration” and touted its investment of billions in the United States.

Goods worth billions cross the borders of the US, Canada and Mexico each day and their economies are deeply integrated.

The Canadian Chamber of Commerce warned that affordability would be hurt and business relationships would suffer, despite the chances for targeted relief.

“We’ve seen this movie before. President Trump puts tariffs in place and then doles out exemptions one at a time,” said Matthew Holmes, the organisation’s chief of public policy. “That is not how a long-lasting trade alliance is built.”

Ontario Premier Doug Ford told Canadian media that the one-month reprieve for automakers would not alter his plans for retaliation, which have already included a halt to sales of US liquor in the province.

Trump’s moves, and his threats to impose “reciprocal” tariffs on countries around the world, have raised fears of a wider trade war.

As well as Mexico and Canada, he hit goods from China with an additional tariff on Tuesday, raising levies to at least 20% and prompting the country to retaliate against US exports, including agricultural products.

Canada also responded with its own retaliatory import levies on US goods after Washington’s 25% tariffs on its two neighbours came into effect on Tuesday, affecting items including peanut butter, oranges and wine.

Mexico also said it would respond, including with its own tariffs.

“I don’t know where we go with this and how it ends. I just hope that it ends quickly,” said Iowa farmer Bob Hemesath, the board president for lobby group Farmers for Free Trade, which has raised concerns about the tariffs.

Big retailers in the US have already warned the measures will lead to higher prices on goods such as avocados within days, while economists are forecasting economic recessions in Mexico and Canada triggered by the tariffs.

Trump has acknowledged his moves may lead to short-term economic pain in the US, but said he wants to protect US industry and boost manufacturing.

He has cast the tariffs this week against goods from America’s two neighbours, as well as China, as a response to the flow of migrants and fentanyl across the border.

Writing on social media on Wednesday, Trump said he had told Trudeau that the situation was not improving.

“He said that it’s gotten better, but I said, ‘That’s not good enough’,” Trump said.

Trudeau has called called Trump’s claims about drugs a “completely bogus” justification for tariffs on his country.

White House officials have said Trump still intends to move ahead on 2 April with plans for reciprocal tariffs on other countries around the world that he sees as treating the US unfairly.

“There are going to be tariffs – let’s be clear – but what he’s thinking about is which sections of the market that maybe he’ll consider giving them relief until we get to, of course, April 2,” Commerce Secretary Howard Lutnick told Bloomberg on Wednesday.

The vehicle manufacturer said “multiple uncertainties facing the automotive industry” had led to its decision decision to pause work on the £600m upgrade of its plant in Cowley.

It said it had decided not to accept a related £60m grant from the government but remained in “close dialogue”.

The UK automotive industry has been in a long-running debate with the government over its targets for electric vehicle production.

Car makers have argued that the number of electric vehicles they are expected to sell in this and coming years is too high.

Earlier this year, the government ran a fast-track consultation on changes to this policy, known as the zero emission vehicle (ZEV) mandate.

Last November, Stellantis cited the mandate as one of the reasons it decided to close its van factory in Luton.

A statement from Mini owner BMW said: “Plant Oxford is at the heart of Mini production, manufacturing and exporting a range of models, which are sought after in the UK and around the world.

“However, given the multiple uncertainties facing the automotive industry, the BMW Group is currently reviewing the timing for reintroducing battery-electric Mini production in Oxford.”

It said much of the investment was progressing, with construction “well under way to make the plant future-ready”, including a project to build new “state-of-the-art logistics facility”.

The statement added: “We have informed the UK government of our decision to review the timeline for reintroducing battery-electric production in Oxford.

“As part of this discussion, we agreed not to take the previously announced grant, but we remain in close dialogue about our future plans.”

In 2023, BMW announced plans to invest hundreds of millions of pounds to prepare the Mini factory in Oxford to build a new generation of electric cars.

Production of two new electric Mini models had been due to begin at the plant in 2026.

The Department for Transport (DfT) said it recognised the challenges car manufacturers were facing and was listening to concerns.

It said it was consulting on “reinstating the 2030 electric vehicle deadline while also protecting jobs”, a decision it said was “supported by a majority of manufacturers who have been working towards this date and are on track to meet their ZEV mandate targets”.

The DfT said it was investing more than £2.3bn to support industry and consumers to make the switch to electric.

Italy’s ancient towns and cities, with their narrow, cobbled streets, offer an obvious explanation why, in the words of US President Donald Trump, Europeans “don’t take our cars”.

Or as car industry analyst Hampus Engellau puts it: “Try to go around Italy in a big SUV. I’ve done it, and it’s very difficult”.

Add cost to the question, and it becomes obvious why you don’t see too many American pick-up trucks on European roads, observes Mike Hawes, CEO of The Society of Motor Manufacturers & Traders, which represents the industry in the UK.

“We tend to have higher fuel prices than the Americans, so we prefer smaller, more fuel-efficient vehicles, while they generally prefer larger vehicles.”

Mr Engellau, who works for Swedish investment bank Handelsbanken Capital Markets, also highlights petrol prices being substantially cheaper in the US. “They pay per gallon what we pay per litre,” he says. There are 3.8 litres to one US gallon.

Yet these differences have done little to deter European carmakers from gaining market share in the US. Again, in the words of Mr Trump, the US has “millions of cars coming in – BMW, Mercedes, Volkswagen and many others”.

In 2022, 692,334 new EU-made cars were exported to the US, worth €36bn ($37bn; £30bn). While only 116,207 new US-made cars went in the opposite direction, for €5.2bn.

This imbalance is caused by unfair trading rules and needs correcting, according to Mr Trump.

“Mr Trump is concerned because the terms of trade are not really equal,” explains Mr Engellau, pointing out that the EU’s 10% tariffs on cars imported from the US far exceeds the 2.5% tariffs the US – currently – charges on cars imported from the EU.

These disparities have prompted Trump to say he wants to raise US tariffs on European automotive imports. He has already announced 25% import tariffs on steel and aluminium imports, two metals crucial for carmakers.

Trump’s move appears to have prompted EU officials to consider reducing their own tariffs in order to protect Europe’s automotive industry from a potential trade war.

Trump’s intervention has not impressed Jim Farley, the boss of US carmaker Ford. “So far what we’ve been seeing is a lot of cost and a lot of chaos,” NBC News recently reported him as saying.

In fact, the very focus on trade is perhaps misplaced, according to automotive industry veteran Andy Palmer, formerly the chief operating officer of Nissan and CEO of Aston Martin, and currently a consultant. “If you can help it, you don’t want to ship cars around the world. They’re big boxes of expensive air,” he says.

The automotive industry is global, adds the SMMT’s Mr Hawes, so carmakers generally want to “manufacture close to where the customer is based”.

As such, several European carmakers, most notably marques such as BMW, Mercedes and Audi, are making some of their largest cars in North America, and some of these vehicles are exported back to Europe.

US carmakers have historically pursued similar strategies in Europe. General Motors owned and manufactured European marques such as Opel/Vauxhall and Saab, but it sold the former in 2017, and shut the latter back in 2009.

Meanwhile, Ford offloaded Aston Martin in 2007, Jaguar and Land Rover in 2008, and Volvo in 2010.

After years of losing money, Ford is currently redirecting its European business towards electric and commercial vehicles and away from small, affordable cars, such as its Focus models.

Ford plans to cut 800 jobs in the UK and 2,900 jobs in Germany by 2027, which represents a 14% reduction in its 28,000-strong European workforce.

Elon Musk’s Tesla has a factory near Berlin in Germany, where it makes its Model Y cars for the European market, but even here there are headwinds as low-cost Chinese imports in particular see their share of Europe’s market for electric cars grow.

Europe is a very tough marketplace for carmakers, according to Jose Asumendi, head of European automotive research at JP Morgan, an investment bank. “You need to have the right products, and you need to run the manufacturing plants well.”

He also points to brands having a competitive advantage in their home countries, be it BMW, Mercedes, Volkswagen and Audi in Germany, Peugeot, Citroen and Renault in France, or Fiat and Alfa Romeo in Italy.

“There’s a natural inclination for people to buy local champions, especially in Germany, France and Italy,” explains Mr Asumendi.

He adds that while other European countries are more open to different brands, the market is crowded, with a slew of Japanese, South Korea, and, increasingly, Chinese cars.

Adding to Europe’s complexities for overseas carmakers are different taxation regulations, and the need to communicate in many different languages.

Mr Palmer does not think “European customers have any particular objections to American cars”, and Mr Asumendi agrees. “I think Europeans do like American brands, but there are many other brands available in Europe, so competition is fierce,” he says.

Mr Trump’s ambition is to make the US car industry stronger, by bringing more production and innovation home. But Mr Palmer insists that a car trade war with Europe will not deliver this.

Not least, he says, since tariffs tend to “insulate the beneficiaries from the free market, and this merely makes them lazy, so they stop innovating and fail to remain competitive”.

“It’s not about trade,” adds Mr Palmer. “It’s about investment and collaboration.”

The move was confirmed by the Business Secretary Jonathan Reynolds who has written to the company asking for it “pause” redundancies to enable more time for discussions “about options to keep the plant open”.

The full letter was posted to X by Luton MP Rachel Hopkins who has been campaigning for the decision to be reversed.

Stellantis previously said rules imposed to speed up the transition to electric vehicles in the UK had partly driven its decision.

The company which also owns Citreon, Peugeot and Fiat announced it would shut the Kimpton Road site next year to combine its electric van production with its other UK plant in Ellesmere Port in Cheshire.

It said this would put about 1,100 jobs at risk.There had been growing concerns among car manufacturers over the sales targets of electric vehicles with many, including Stellantis, calling for the government to do more to boost consumer demand.

In his letter Mr Reynolds said: “Vauxhall has had a proud legacy in Luton for over a century and I share your disappointment that the company has decided to pursue this option.

“He said if plans for the closure do go ahead, the government would work to support employees affected by redundancy.”

Luton has a talented workforce and the Government is keen to work with you to support maintaining skilled manufacturing jobs in the area,” he added.

The ban on sales of these vehicles had been extended to 2035 under the previous Conservative government but Labour said it would restore the 2030 deadline in its election manifesto.

Transport Secretary Heidi Alexander is now seeking views from automotive and charging experts to “restore clarity” on how to deliver the ban.

Car industry leaders have warned drivers were not switching to electric vehicles at the rate needed to meet the deadline due to the cost of buying the cars privately and charging point infrastructure.

Last month, Ford said the UK government’s mandate to produce and sell more electric vehicles (EVs) “just doesn’t work” without demand.

Lisa Brankin, Ford UK’s chair and managing director, told BBC Radio 4’s Today programme: “The one thing that we really need is government-backed incentives to urgently boost the uptake of electric vehicles.

“The Department for Transport said the consultation would “restore clarity for vehicle manufacturers and the charging industry” so they “have the confidence to invest in the UK in the long term and drive growth in the UK automotive industry”.

The government said the consultation would be part of a “wider push” to make it easier and cheaper to charge electric cars.

There are now more than 72,000 public charging points in the UK, with another 100,000 planned by local authorities across England, according to the government.

The lack of sufficient charging infrastructure, particularly in rural areas and homes without private parking spaces poses an issue as well – one that analysts will take several years to resolve.

The cost of EVs remain a barrier to people switching as even the most affordable models are still pricier than their petrol or diesel counterparts.

The government said EVs made up one in four cars sold in the UK. It said industry data put 1 in 3 used electric cars at under £20,000.

Edmund King, president of the AA, said drivers have been “hesitant about the transition but not hostile” but the consultation would bring more clarity and certainty.

Mike Hawes, chief executive of the SMMT, said it was “imperative we get an urgent resolution” to adapt the mandate to help car makers achieve it along with “bold incentives” to get drivers to buy electric vehicles.

The consultation proposes updates to the Zero Emission Vehicle (Zev) mandate, which sets out the percentage of new zero emission cars and vans that manufacturers will be required to sell each year up to 2030.

In 2024, EVs must make up 22% of a carmaker’s car sales, and 10% of van sales. This target is set to rise. Firms failing to meet these targets face a £15,000 fine per sale.

Companies can avoid fines by buying “credits” from firms that have exceeded their quotas for electric car sales. They can also “borrow” allowances from future years.

The Energy and Climate Intelligence Unit think tank said target required to be achieved by each manufacturer was due to be reached as an average across the industry because these credits would be taken into account.

The government’s eight-week consultation aims to gather views on which cars can be sold alongside zero emission vehicles from 2030, including full hybrids and plug-in hybrids, as well as the strategy for vans and the policy for small volume manufacturers.

More than two-thirds of car manufacturers in the UK, including Stellantis, have committed to transitioning fully to electric cars by 2030.

However, firms have also announced thousands of job cuts, partly because of EV targets.

UK car production experienced a sharp decline in October 2024, with overall output dropping by over 15% compared to the previous year. Automotive industry body the Society of Motor Manufacturers and Traders (SMMT) attributed this fall to weak demand and a significant decrease in exports.

Electric and hybrid vehicle production saw an even steeper decline, falling by one-third due to flagging European demand and factory retooling for new models.

“Today’s measures will help us capitalise on the clean energy transition to support thousands of jobs, make the UK a clean energy superpower, and rebuild Britain,” Alexander said.

More than 160 workers have been rescued in Brazil’s northeastern state of Bahia, according to a statement from the Public Labour Prosecutor’s Office (MPT).

They were allegedly put in a “degrading” environment and had their passports and salaries withheld by a building company.

BYD said in a statement that it had cut ties with the firm involved and remained committed to a “full compliance with Brazilian legislation”.

The factory was scheduled to be operational by March 2025, and was set to be BYD’s first EV plant outside of Asia.

The workers, hired by Jinjiang Construction Brazil, lived in four facilities in Camaçari city.

At one such facility, workers were made to sleep on beds without mattresses, according to prosecutors.

Each bathroom was also shared among 31 workers, forcing them to get up extremely early in order to be ready for work.

“The conditions found in the lodgings revealed an alarming picture of precariousness and degradation,” the MPT said.

“Slavery-like conditions”, as defined by Brazilian law, include debt bondage and work that violates human dignity.

The MPT added that the situation also constitutes “forced labour”, as many workers had their wages withheld and faced excessive costs for terminating their contracts.

BYD said affected workers had been moved to hotels.

It added that it had conducted a “detailed review” of the working and living conditions for subcontracted employees, and asked on “several occasions” for the construction firm to make improvements.

BYD, short for Build Your Dreams, is one of the world’s largest EV makers.

It sold more electric vehicles than Elon Musk’s Tesla in the last three months of 2023, as the two battled for top spot in the sector.

The company has also been expanding its foothold in Brazil, which is its largest overseas market by a wide margin.

It first opened a factory in São Paulo in 2015, producing chassis for electric buses.

Last year, it announced that it would invest 3 billion reais ($484.2m) in Brazil to build an EV manufacturing plant.

EV sales in China have been boosted by government subsidies. which encourage consumers to trade their petrol-powered cars for EVs or hybrids.

But there is a growing backlash abroad against what some see as the Chinese government’s unfair support for domestic car makers.

Major markets like the US and EU have placed tariffs on EVs from China, with more tariffs expected during the incoming administration of US president-elect Donald Trump.

Some on social media said the new Type 00 car was “exciting” and “absolutely stunning”, while others called it “rubbish” and told Jaguar’s designers to “go back to the drawing board”.

The carmaker, which is embarking on the biggest change in its history, announced a new logo and released a so-called “social media tease” last month, ahead of its relaunch as an electric-only brand.

Many critics pointed out that the promotional video did not feature an actual car but the firm was also praised by some for its bold new approach.

Last month, Jaguar Land Rover (JLR) stopped selling new Jaguar cars in the UK ahead of its relaunch as an electric-only brand in 2026.

Sales of its cars have been plummeting in recent years, and some have argued that as its traditional, heritage image does not seem to be working, the rebranding is a gamble with a limited downside.

Following the deluge of publicity following last month’s teaser video, Jaguar urged people to “trust and reserve judgement” over the rebrand of the business, which has a history dating back more than a century.

The Type 00 model unveiled at a Miami art fair is a concept car and so will not go into production for sale to the public.

However, it gives a pointer to the direction of the brand’s new models, which are expected to cost in excess of £100,000 when they go on sale.Jaguar’s chief creative officer, Gerry McGovern, said he welcomed the attention the new direction had been getting.

“It has already stirred emotions and it will continue to,” he said. “Jaguar has no desire to be loved by everybody.”

Car industry analyst Karl Brauer was sceptical. The company seems to be “sacrificing Jaguar’s past to the hopes of a better future,” he said. “I don’t think it’s going to work.”

Many on social media said the new model looked similar to existing cars, and James May, broadcaster and former presenter of Top Gear, said he was “slightly disappointed” by it.

“I wanted something more futuristic,” he said.

“I mean, Jaguar have been saying they will copy nothing, but there’s quite a bit of other concept cars in that new Jag.”

Beatrix Keim, director at the Center of Automotive Research, said that Jaguar’s concept car was “too big, too unreal”.

“This is not the way to go,” she said, given that there are already big cars in the market and “electric cars cannot only be for the rich”.

“Of course, Jaguar is a luxury brand,” she added. “But I don’t think that this is the direction which Jaguar at current point of time needs, because it’s losing out on volume as well. And this is not a volume car.”

Amanda Stretton, a racing driver and motoring journalist, also agreed the Jaguar concept car was too big.”It’s an absolute nonsense,” she said. “It needs to be shrunk by about 50% to be practical.”

But Andy Palmer, a former boss of Aston Martin and Nissan’s ex-chief operating officer, said Jaguar needed to change as it had been “failing as a brand for a long time now”.

He called the new design “a brave change of direction” although he agreed it was “huge”.

“The rhetoric around electric cars has to be one of how you move the cars to being more affordable,” he said. “Jaguar is an outlier.”

Stretton also said Jaguar was going in the “wrong direction” on price.

“The market for cars in excess of £100,000 is not enormous. So Jaguar’s trying to break into a market that’s already tightly fought.”

May said Jaguar cars had traditionally been “very reasonably priced compared with, for example, Aston Martin”.

“So I’d like to see something more like half the price that they’re toting at the moment.”

JLR said the decision to stop selling new Jaguar cars in the UK last month was a deliberate move to “create some breathing space” before unveiling its new look.

It announced the transition to electric vehicles in 2021, keeping all of its three British plants open as part of the strategy.

Jaguar has been the weakest link within the JLR group, which has been owned by Tata Motors for almost a decade.

Jaguar sold 180,000 cars in 2018, but last year sales were down to 67,000.

The Range Rover and Land Rover Defender were behind JLR’s highest profits since 2015, which were announced earlier this year.

His abrupt exit from the company – which owns brands including Vauxhall, Jeep, Fiat, Peugeot and Chrysler – comes two months after Stellantis issued a profit warning.

Last week, the firm also announced plans to close its Vauxhall van making factory in Luton, putting about 1,100 jobs at risk.

Before his resignation, Mr Tavares was one of the most powerful people in the global motor industry.

In a statement announcing Mr Tavares’ departure, Henri de Castries, Stellantis’ senior independent director said: “Stellantis’ success since its creation has been rooted in a perfect alignment between the reference shareholders, the board and the chief executive.

“However, in recent weeks different views have emerged which have resulted in the board and the chief executive coming to today’s decision.”

Mr Tavares had a reputation as a ruthless cost-cutter.

He made his name at Renault, working with the colourful and controversial chief executive, Carlos Ghosn, before taking the top job at PSA Group.

At the time, the French group was close to bankruptcy. He was credited with turning it around before orchestrating a merger with Fiat Chrysler to form Stellantis in 2021, creating a global giant.

“He was known for being able to turn around companies that were troubled,” Hans Greimel, Asia editor at Automotive News said.

However, Mr Tavares’ position has been undermined recently by a dramatic fall in sales and profits at the company.

“Critics would say he was just cost-cutting too much and delaying products and also hurting quality,” said Mr Greimel.

In September, Stellantis had issued a profit warning after it reported a sharp drop in sales in North America.

Dealers found themselves struggling to shift a glut of unsold vehicles, which customers simply didn’t want to buy.

The company was criticised for producing too many cars of the wrong type, failing to adapt to changing customer tastes and losing ground to more dynamic rivals.

Prof David Bailey from the Birmingham Business School said that while there is “huge turmoil in the car industry generally” Stellantis has its own “particular problems”.

He said: “What’s really, really driving that, I think, is the situation in North America where they’ve had appalling results, a very dated product line-up, rising inventories and slipping market share as a result of which all the stakeholders involved – suppliers, dealers, workers, investors – are deeply unhappy.

“I think that has penetrated the board and made his position untenable.”

Stellantis’ share price has fallen by 40% since the start of this year, a far worse performance than its rivals.

Mr Tavares had already agreed to step down in 2026, rather than extending his contract – a move that arguably weakened him significantly.

Stellantis said it now expected to appoint a new chief executive by the middle of next year.

In the meantime, it said it will set up a new interim executive committee, headed by the firm’s chair John Elkann who is a member of the powerful Agnelli family of Italian industrialists.

Mr Elkann controls a significant voting stake in the group on behalf of his family.

He is the one currently leading the search for Mr Tavares’ successor and his views will be crucial in shaping the future of the automotive giant.

Mr Tavares frequently made headlines in the UK by casting doubt over the future of Vauxhall operations, linking it to issues such as Brexit and government plans to force car makers to build more electric cars.

It is not yet clear whether his departure will affect the planned closure of Stellantis’ Luton plant.Stellantis’s Vauxhall plant in Luton 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.

The company is now planning to combine its electric van production at its other UK plant in Ellesmere Port in Cheshire.

In Europe, Stellantis has suffered the same fate as many other manufacturers – coming under pressure from Chinese rivals at a time when take-up of electric vehicles has been more sluggish than expected.

A tie-up with the China’s Leapmotor may reap dividends, but is in its early stages.

On what the change at the top means for Luton, Prof Bailey said: “I think everything is up in the air. Whether or not that could be reversed I don’t know. One would hope but I suspect that that has gone sadly.

“…I don’t think there are any guarantees about the future whatsoever of Stellantis’s operations in the UK.”

The comments add to a growing row between the government and the industry over the sale of new petrol and diesel cars being phased out over the next few years.

On Tuesday, Stellantis, the owner of Vauxhall, said it would close a plant in Luton, putting 1,100 jobs at risk, partly due to the EV targets.

Business Secretary Jonathan Reynolds told the House of Commons on Wednesday that Stellantis’s decision was “a dark day for Luton”.

It joins Ford in axing UK jobs. Last week, it announced it will cut 800 jobs in the UK over the next three years, partly due to the EV target but also because of increased competition.Ms Brankin said: “The one thing that we really need is government-backed incentives to urgently boost the uptake of electric vehicles.”

She said Ford has invested “significantly” in the production and development of EVs, with “well over” £350m put into electrification in the UK.

“So we kind of need to make it work,” she said.

Both firms have previously raised doubts about their future in the UK because of other factors, separate to EV targets.

Ford closed its Bridgend factory in 2020, axing 1,644 jobs, citing Covid-19 as one of the reasons while Vauxhall’s former owner suggested in 2019 that Brexit threatened its Luton factory.

Meanwhile, some analysts have said a shift towards luxury vehicles and away from cheaper models are also part of the reason for Ford’s problems.

Reynolds blamed the previous government for Stellantis’ Luton closure, saying Labour had “inherited a position of extreme frustration”.

He said there would be a “fast track” consultation of how the EV targets are enforced, but reiterated Labour’s commitment to a 2030 phase-out of new petrol and diesel vehicle sales.

However, shadow business secretary Andrew Griffith said the 2030 target was a “jobs killer” and that Stellantis’ decision was “the direct result of a government policy that is simply unworkable for industry”.

The previous Conservative government moved the deadline for the phase-out from 2030 to 2035, but it kept penalties for non-compliance.

Under the current mandate, a percentage of the cars that companies sell must qualify as zero-emission.

EVs must make up 22% of a company’s car sales and 10% of its van sales this year.For every car sale outside of that, firms must pay a £15,000 fine.

That target is set to rise to 28% for cars and 16% for vans in 2025. The rules will then get tougher every year ahead of a complete ban of new petrol and diesel car sales.

Labour has said it intends to reinstate the 2030 target as part of its wider commitments to climate change policy, but it will consult on how the “direction of travel” for the policy will work.

There are flexibilities in the current system, allowing manufacturers that can’t meet the targets to buy “credits” from those that can.

In practice, this means firms could buy credits from companies such as Tesla or Chinese firm BYD, which build electric models exclusively.

Manufacturers argue that demand for electric cars has not been as high as was expected when the rules were drawn up.

As a result, to avoid fines, they say they are having to discount new vehicles heavily, or subsidise rivals that only build electric cars, none of whom have a manufacturing base in the UK.

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

Reynolds told an industry audience at a dinner hosted by Society of Motor Manufacturers & Traders (SMMT) on Tuesday he is “profoundly concerned” about the way zero-emissions policies currently operate.

“I don’t believe the policies that we have inherited, and I mean specifically in relation to zero emission vehicles, are operating today in a way anyone intended them to,” he said.

He and Transport Secretary Louise Haigh met car firms last week to discuss the EV rules.A number of options have been suggested, such as allowing sales credits to be transferred between cars and vans and giving “credits” for British-made EVs sold abroad.

The SMMT has called for urgent government intervention to safeguard the sector, warning that weak demand for electric cars and the requirement to fulfil sales quotas had “the potential for devastating impacts on business viability and jobs”.

Nissan, which builds EVs at its plant in Sunderland, has said at the time 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”.