Labour is considering ways to help struggling car makers meet electric vehicle sales targets by looking into ‘flexibilities’, as manufacturers warn of pulling production from the UK.
Transport Secretary Louise Haigh and Business Secretary Joshua Reynolds will meet with car industry representatives on Wednesday to discuss ways to help beleaguered firms meet the strict Zero Emission Vehicle Mandate (ZEV) thresholds introduced this year.
Many car makers are struggling to meet the binding targets, introduced by the Tories and continued by Labour, which require more than a fifth of all sales by mainstream manufacturers to be EVs this year.
Failure to adhere to the 22 per cent threshold could result in fines of £15,000 per car below the target – and some manufacturers are said to be reaching ‘crisis point’ as the year end draws closer.
Some car makers – including Vauxhall-owner Stellantis – have threatened to pull production from the UK entirely amid the row over sales targets, while Nissan is expected to warn MPs that it could do the same if no Government support is provided.
This comes after the Chancellor did little to help incentivise EV uptake in the October Budget.
Transport Secretary Louise Haigh and Business Secretary Joshua Reynolds will meet with giants of the car industry to discuss the strict zero emission vehicles mandate
To what extent government will relax EV sales targets remains unclear.
The Financial Times reports that while the Transport Secretary is in ‘listening mode’, she is reluctant to adjust EV sales targets.
On Saturday, The Times reported that Haigh and Reynolds are expected to tell industry players that ‘all options’ are on the table.
Discussing the matter on LBC Radio, Haigh doubled down on the existing targets and said the mandate requirements won’t be weakened.
Ms Haigh said: ‘There are flexibilities in the current mandate, but we want to work with the manufacturing sector about whether these are working and whether we can address them.
‘But the level of our ambition and the mandate will not be weakened.’
‘Options’ to be discussed on Wednesday are said to include: bringing back EV grants for private customers; allowing exported EVs to count towards targets; allowing reduced carbon emissions in factories to count towards targets and; equalising the ZEV percentage difference between cars and vans.
Motorists in general have received very little financial support in the shape of Government grants when it comes to purchasing EVs – especially since the Plug-in Car Grant was axed prematurely in June 2022.
Most recent car sales figures show more EVs being sold but that numbers are behind target
Car makers threaten to pull out of UK over binding EV sales targets
The forthcoming consultation comes off the back of a very challenging year for manufacturers.
Stellantis is reported considering pulling its manufacturing investment in the UK, with former boss Maria Grazia Davino in June saying it could end vehicle production at its Ellesmere Port and Luton factories, putting minsters on notice by saying the decision will be made in ‘less than a year’.
The FT also suggests Nissan will warn ministers this week that the nation’s car industry has reached a ‘crisis point’, with jobs and competitiveness at risk unless the government relaxes electric vehicle rules.
This is Money has reported how car brands are resorting to ‘desperate’ tactics to try and hit ‘binding end-of-year sales’ including slashing new EV prices by up to a third, using the Motability market to increase sales and putting on more dealership demonstrators to artificially notch-up EV registrations.
Calls for new electric car grants and direct private customer incentives went unanswered in the Chancellor’s Autumn Budget, as did reductions in VAT paid on public charging to bring rates in line with home charging and removing the disparity between those who can charge on their driveway and those who can’t.
This has led to the Government admitting to The Times that ‘the UK has become a hard place for manufacturers to do business’.
Haigh told LBC that ‘there has been a downturn in demand on a global level so we are absolutely in listening mode’ and will ‘discuss the challenges they [manufacturers] face on a global scale.’
The ZEV mandate introduced in January and sets binding EV sales targets that increase annually over the next decade
ZEV mandate – what are the electric car sales targets?
The Zero Emission Vehicle (ZEV) mandate, introduced by Government this year to force manufacturers to increase their share of EV sales from now until 2030, threatens fines of £15,000 per electric car below the required quota.
Electric cars need to make up 22 per cent of all sales in 2024.
Brands selling fewer than 1,000 ZEVs a year are exempt from the rules.
In 2025, brands need to up their EV share of sales to 28 per cent and the year after the threshold rises to a third (33 per cent).
By 2028, more than half (52 per cent) of all models sales need to be zero emissions.
For 2030, the requirement is for 80 per cent of all new car registrations by brand to be zero emission EVs.
The remaining 20 per cent allowance will only be for some hybrid cars.
The DfT is to confirm which type of hybrid will be given a five-year stay of execution until 2035, though This is Money expects it to be primarily plug-in hybrid vehicles, which have the longest EV-only ranges.
How car makers are struggling to hit EV sales targets
Almost 300,000 new EVs entered UK roads in 2024, representing 18.1 per cent of the market – an increase on 2023.
Yet, this is still significantly short of the 22 per cent target for this year – and of the 28 per cent which must be achieved in 2025 – under the Vehicle Emissions Trading Scheme.
However, there are some allowances within the ZEV mandate rules.
If manufacturers reduce their average CO2 emissions and exceed their CO2 target, then they can ‘convert’ this into credits against their ZEV targets.
This is subject to an exchange rate, a cap (65 per cent of the 22 per cent target in 2024) and is only an available option for the first three years until the end of 2026.
Brands sitting under the same manufacturer umbrella – for example, VW, Skoda, Seat, Porsche, Bentley and Cupra all being part of the Volkswagen Group – can share ZEV credits across marques to achieve the binding targets.
Car makers below the required threshold at the end of each year can also evade fines by purchasing credits from other manufacturers that are far exceeding the ZEV requirements (particularly EV-only brands such as Tesla and Polestar) or can defer their missed quota to future years.
The UK is tracking short of the 22% ZEV targets the government has set for this year
Commenting on the latest new car sales figures from October, Mike Hawes, SMMT chief executive, said: ‘Fleet renewal across the market remains the quickest way to decarbonise, so diminishing overall uptake is not good news for the economy, for investment or for the environment.
‘EVs already work for many people and businesses, but to shift the entire market at the pace demanded requires significant intervention on incentives, infrastructure and regulation.’
Ian Plummer, commercial director of Auto Trader, commented: ‘Manufacturers are making significant efforts to bridge the price gap to electrics – as shown by the 12 per cent discounts on Auto Trader’s site in October – but the market is still not achieving the volumes needed.
‘With the reinstated 2030 ban date on the sale of new petrol and diesels vehicles looming, we urgently need to make the positive case for EVs to ensure a broader healthy new car market.’
This is Money has reached out to the Department for Transport for comment.
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