A record 100,000 fully electric new cars hit UK roads in September, the sixth consecutive month when battery electric vehicles (EVs) have exceeded sales of petrol vehicles. Although the public might not be that familiar with it, there’s been a government policy running in the background for nearly three years helping to boost these figures.
The zero emission vehicle (ZEV) mandate was designed to ramp up the number of electric cars and vans sold in the UK through a series of annual targets. Despite the success of this policy, pressure from some carmakers, including BMW, JLR and Nissan, has led to the government wavering and consulting on whether to now reduce the speed at which the market goes electric. The consultation closes today, the 23 October, with the very real possibility that ambitions will be watered down.
It’s important drivers understand how this change might affect them now and in the future. The average car now lasts 17 years until it is scrapped and, by that time, it has passed through four or five owners. New cars sold now will be the secondhand cars of the 2030s. Each petrol or diesel vehicle sold ties future owners, who tend to have lower incomes with each change of hand, to whatever the oil price is doing into the 2040s. The mandate’s target dictates how many households that will affect, and for how long.
Events of recent months have made the exposure very clear. Conflict in and around Iran has produced the second fossil fuel price shock in four years. At the end of September, diesel passed the symbolic £2 per litre mark for the first time, with petrol around 25 pence behind.
This is terrible news for drivers already caught in the midst of a seemingly never ending cost of living crisis, but it’s still only part of the picture. Diesel powers the vans used by tradespeople and small businesses, HGVs supplying supermarkets and manufacturers, farm machinery, virtually all ferries and much of the nation’s bus fleet. Higher diesel costs translate into rising inflation for goods and services for everyone, right across the economy.
Moving the transport system off oil will make the UK economy more resilient, and the mandate is a vital – and symbolic – part of that. Watering it down would cast doubt on the government’s intentions and whether it holds to its commitments under pressure.
There are now over two million EVs on UK roads and the data shows that they are cheaper on average to buy new than petrol cars, and they are saving drivers up to £1,400 a year in running costs. On the current trajectory, switching to EVs could almost halve UK reliance on oil imports by 2040. Cutting interim targets for EV sales while leaving the same phase out dates in place for new petrol and diesel cars risks increasing fossil fuel consumption over the same period by 28 million tonnes.
The reason this has become an issue is that some carmakers are arguing for a weaker target to protect their businesses. They say they will be financially penalised for not meeting the sales targets or will have to subsidise EV sales while facing trade barriers, Chinese competition and high energy costs.
While these challenges are real for the industry, the wider argument still doesn’t stack up, particularly over the longer term. Over 75 per cent of cars built in the UK are exported and fall outside the mandate, rising to over 80 per cent for JLR and Toyota, two of its vocal critics. What these manufacturers can produce is therefore shaped mainly by overseas demand, tariffs and energy prices, and weakening targets for UK sales will do nothing to address those pressures.
For the cars sold here, flexibilities built into the policy make the target more achievable: manufacturers receive credits, for instance, for selling lower emission combustion models. These flexibilities effectively mean only 24.6 per cent of new car sales this year need to be fully electric, rather than the headline 33 per cent target, a level the industry is highly likely to exceed. It complied with the target in 2024 and 2025 without any fines being imposed.
Claims that manufacturers are having to heavily discount EVs also don’t hold water. Autotrader’s data shows diesel cars are now discounted more than electric cars, and petrol cars are discounted at similar levels.
China has invested billions nurturing a future facing car industry over the past two decades, and other countries now need to adjust and catch up to compete. Weakening the mandate to help a few struggling UK manufacturers would leave it behind in an industry that’s rapidly going electric and would harm the many companies trying to innovate and grow in the market. Manufacturers are retooling UK plants for electric production, with gigafactories planned in Somerset and Coventry. ChargeUK’s members have committed £6 billion to new charging infrastructure by 2030 and £7 billion in investment has been committed across the UK battery supply chain. ECIU’s analysis is that failure to move with the times could cost the UK economy £34 billion and 400,000 jobs.
The transition to EV manufacturing isn’t straightforward for carmakers or their supply chains, but not making the move will arguably be more painful. Rather than weaken the target, the sector needs measures to support it through the changes. These include further action to lower industrial electricity costs, a well thought through, long term automotive industrial strategy that builds out future capability and skills in key regions, and a social leasing scheme that helps lower income households while increasing demand for small British-built EVs.
For the climate, the stakes are just as high. The ZEV mandate is expected to deliver the largest emissions cuts of any individual policy into the next decade. Weakening it now would have consequences well into the 2040s. Our estimates are that reducing the 2030 targets for cars and vans from 80 and 70 per cent respectively to 50 per cent, in line with options in the consultation, could leave the UK 13 per cent over its emissions limit across the seventh carbon budget period, which ends in 2042. To stay within that limit would mean demanding more cuts from other sectors, such as agriculture, heavy industry and buildings, which are likely to find it harder and more expensive to achieve.
What the government chooses to do when the consultation closes is a major test of its commitment to both the future of the British car industry and climate action. Ministers should respond by signalling their confidence in the current direction of travel.
This post was originally published in BusinessGreen.
Image credits to Andrew Roberts on Unsplash
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