President Trump’s erratic tariff policy is making manufacturers nervous around the world. It’s right that Prime Minister Keir Starmer is seeking ways to support the UK car industry through the uncertainty. But there is a risk that the changes the government has recently announced to industry targets for electric vehicles (EVs) could put the brakes on EV sales and investment. We need renewed action to build on the UK’s market lead in electric vehicles, so we see the benefits of cleaner and cheaper motoring sooner.
Policy changes risk the UK’s status as the biggest EV market in Europe
The Zero Emission Vehicle (ZEV) mandate gives a clear direction to the UK car industry by setting out rising sales targets for electric vehicles. Since its introduction under Boris Johnson’s Conservative government, the mandate has driven competition between brands and successfully accelerated EV sales in 2024 and the first quarter of this year. This has made the UK the largest European market for electric vehicles.
In response to industry pressure and new US tariffs, the Prime Minister announced plans to give car makers more leeway in how they meet their yearly targets until 2029. For instance, if they don’t sell enough EVs in one year, they can now make up for it by selling more in the coming years. They can also count more petrol and hybrid vehicles against their targets, over the same period, based on an assumption they’ll be more fuel efficient.
It’s understandable that the government wants to give manufacturers struggling with current economic conditions some extra room for manoeuvre. But the government is now offering so much flexibility in the regulations that the transition to pure electric vehicles could slow down, and a higher number of petrol hybrids may be sold instead.
Hybrids don’t deliver the fuel efficiency or carbon savings originally promised in test results. When driven in real world conditions they can be as much as 3.5 times more polluting. The government knows this, but despite setting out the evidence in its own consultation it has stuck with discredited fuel efficiency and emissions figures.
After the ‘dieselgate’ scandal, we need to be clear about the costs of more polluting vehicles. More hybrids will mean more drivers have to struggle with higher fuel costs, set by a volatile international oil market, for longer. It will also mean more we have to put up with more air pollution and climate-changing emissions.
More investment requires certainty over the government’s plans
The ZEV mandate had given confidence to the wider supply chain and to investors. We’ve already seen as much as £23bn investment in EV and battery manufacturing in the UK in the three years since it was announced, far ahead of European competitors. The charging industry committed to invest £6bn of private capital up to 2030, based on sales of EVs projected under the previous regulations.
It’s more difficult to make investment decisions if the pace of change is harder to judge, and this is the likely result of extending the flexibilities to 2029 and allowing more exemptions based on emissions. It sets up a cliff edge after 2029 where carmakers can only meet targets through EVs sales, trading with competitors or paying fines. During an election year, this could lead to significant pressure on the government to make further changes.
There’s lots policymakers can do to support cleaner and cheaper motoring
We now need policy makers to focus on maintaining our market lead by supporting demand for electric vehicles. If we keep up the pace of EV sales, this could support the government’s growth mission. Research from the CBI has shown that EV production has the potential to contribute £16bn gross value added (GVA) to the UK economy by 2035.
How policymakers can help is by setting clear industrial strategy, enabling more investment in infrastructure and using regulations to encourage people to buy electric. One of the advantages of setting out an industrial strategy, which is eagerly anticipated this summer, is the opportunity to fix complex issues that affect the whole of the economy. One of these is the high price of electricity for industry, pushed up by soaring international gas prices. Taking action to bring this down would mean carmakers have a viable future in the UK, just like steel manufacturers.
The government should also set out further investment plans in the forthcoming spending review to accelerate the roll out of charging infrastructure, addressing the shocking gaps that currently exist between regions. Westminster Borough Council currently has more charging points than Greater Manchester and Merseyside combined, which have 20 times its population. We need to fix this to support the growth of the UK’s charging industry and give more drivers across the UK the confidence to switch to EVs.
There are also plenty of regulatory or fiscal measures the government could use to support demand for electric vehicles and the UK car market. These include removing barriers to home charging for those without driveways, introducing a ‘right to plug’ for renters and leaseholders and cutting VAT on public charging.
There’s lots to gain from a rapid transition to electric vehicles: from reducing the economy’s exposure to future fossil fuel price shocks, to cutting costs for drivers and helping us to breathe cleaner air in our towns and cities. Policymakers should be encouraged by the UK’s new lead in the market and keep us motoring ahead.
This article was originally published in BusinessGreen.
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