Plant closures and job cuts at major manufacturers, and wider industry concern, have prompted a review of the zero emission vehicle (ZEV) mandate, which sets out plans for all new cars and vans to be zero emission by 2035.
At the Society of Motor Manufacturers and Traders’ (SMMT) annual dinner yesterday evening (26 November), business secretary Jonathan Reynolds reportedly said: “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.”
The 2030 ban on sales of new petrol and diesel cars will reportedly remain in place, but carmakers are keen for other elements of the mandate – including fines for missing EV sales targets – to be updated.
“Weak demand for EVs and the need to fulfil ever-rising sales quotas will cost the industry some £6 billion in 2024, and even more next year – with the potential for devastating impacts on business viability and jobs,” an SMMT announcement said.
“Since the mandate was designed more than two years ago, the original assumptions on which it was founded have not yet been borne out. Market demand has… failed to meet ambition, interest rates are steep, raw material and energy prices remain high, and geopolitical tensions and economic uncertainty are impacting global confidence.”
When the mandate was unveiled, industry anticipated that 457,000 electric cars would be registered in 2024, which would have accounted for 23.3% of all new car registrations – above the target of 22%. The latest SMMT figures show just 363,000 will be sold, however, with a market share of 18.7%.
“The industry has been very clear on this for some time now, that the mandate had been brought in at too high a level – in fact the introduction of it has been very poor,” said automotive industry expert David Bailey, professor of business economics at the University of Birmingham, to Professional Engineering.
“The problem is that electric vehicle sales aren't going to get to 22%, and even with all of the flexibility that's in there already – whereby they can buy credits, and they can get points from reducing emissions from existing cars – the industry is going to face a big fine.”
He added: “At the moment policy is all sticks and no carrots. The government is basically flogging the industry with targets which are simply not achievable.”
The target percentage of sales is 28% ZEVs in 2025, rising to 80% in 2030. Companies that fail to meet the targets can be fined £15,000 per non-EV car sold outside the target.
“There's a real dilemma for policymakers,” Professor Bailey said. “On the one hand, you want to encourage very rapid EV take-up. Now if we're going to do that, we want to buy cheap electric vehicles – they're likely to come from China, in fact the policy as it’s set up at the moment is fining domestic producers, who can then buy credits from Chinese producers who are selling their cars here.
“So effectively, we're fining the domestic industry, subsidising Chinese firms which are already very heavily subsidised. That doesn't seem quite right to me, so there has to be a balance between fostering a switch over to electric vehicles and supporting the domestic production base in being able to make the cars as well.”
‘Fining people is no good’
Car journalist Quentin Wilson, founder of EV campaign group FairCharge, also called on government to look again at the flexibilities in the mandate, including “softening” fines and reappraising the credit system.
“We can't have our motor industry paying people like Tesla or [Chinese EV company] BYD for credits to hit the targets, and fining people is no good – if there are any financial penalties, that money should go back towards the motor industry, and back towards battery research and improved battery chemistries and things like that,” Wilson told Professional Engineering.
“The mandate has made us the second most successful EV market in Europe, and that's an industrial opportunity. What we shouldn't do is throw it away and allow the Chinese to take that from us… who in September this year alone, sold 1.7 million cars just in a single month.”
Missed sales targets are related to wider geopolitical issues, Wilson said, as well as huge inflation in car prices, which has seen cars that were once around £15,000 now priced at closer to £30,000.
Despite the challenges, he said the UK is “beginning to lead the conversation in electric cars”. He also predicted that Donald Trump’s planned removal of a $7,500 consumer tax credit for EV purchases could encourage “restless capital” to look for “safe havens” to invest elsewhere.
‘The industry is hurting’
Falling short of the 22% EV market share could create a £1.8 billion bill for companies that miss their targets, the SMMT said. Manufacturers have had “no option” but to subsidise with sales worth an estimated £4 billion in discounts, the organisation added.
The result is a total ‘compliance bill’ that could be worth almost £6 billion, with costs set to increase next year. “With global manufacturers already making production cutbacks due to weak EV demand, losses of this scale could force brands to withdraw from the UK market and cause global investors to question the UK’s appeal as a manufacturing destination,” the announcement said.
SMMT chief executive Mike Hawes said: “We need an urgent review of the automotive market and the regulation intended to drive it. Not because we want to water down any commitments, but because delivery matters more than notional targets.
“The industry is hurting; profitability and viability are in jeopardy and jobs are on the line. When the world changes, so must we. Workable regulation – backed with incentives – will set us up for success and green growth over the next decade.”
Incentives and infrastructure
After the announced closure of the Vauxhall plant in Luton, threatening 1,100 jobs, and Ford’s announcement of 800 job cuts in the UK over the next three years – which it linked to weak EV demand – those in the industry will hope that changes to the mandate could prevent any further job cuts. Environmental groups and those in government will also be keen to avoid any slowdown in the EV transition, and the associated threat to emissions reductions.
Professor Bailey called for steps including incentives for buyers, quicker building of charging infrastructure, and a supportive industrial strategy, which is currently being consulted on.
Wilson also criticised a lack of action from the industry and the government to help consumers understand EVs, which he said had been undermined by false narratives from social media and the “right wing press” about battery failures and fires.
“Government and the car industry really needs to talk more about what EVs are like to own,” he said. “Somebody who's curious about electric cars reads this stuff in these right wing papers, and believes it.
“When you talk to the one-and-a-half million people who are happily driving EVs around now, all the surveys say that 90% would never go back to combustion… The batteries aren't failing, they're not breaking down. The technology, and that's the most important thing, it works and it's proven.”
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Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.