ZEV Mandate under fast-track review

Government to review the trajectory of its zero emission vehicle sales targets amid OEM resistance that regulation can compel supply, but not compel demand

The Government is set to review the Zero Emission Vehicle Mandate before the end of this year, amid intense pressure from vehicle manufacturers and the automotive finance sector.

She added that the Government had already started some early engagement with the car manufacturers as part of this review process, although any changes will require the agreement of devolved Governments in Scotland and Wales.

Alexander has already ruled out any changes to the 2030 phase-out date for banning the sale of new petrol and diesel cars, and she confirmed that there are no proposals to change the 2035 phase-out date for hybrid vehicles.

But she acknowledged that the current trajectory of the ZEV Mandate is an issue for car makers, which have told the Government that they are experiencing significant challenges at the moment.

The ZEV Mandate sets highly stretching targets for the percentage of zero emission vehicles that an OEM has to achieve in its new car and van sales. Failure to hit the targets, which ratchet up annually, will lead to heavy financial penalties.

So far, both new car and new van sales have missed their ZEV Mandate thresholds every year since the regulation came into force in 2024, although no OEM has actually been fined thanks to flexibilities introduced last year.

These flexibilities allow manufacturers to score additional credits if they reduce the CO2 emission of their other vehicles. They can also borrow credits from their future performance, on the grounds that they anticipate a significant over-performance in their zero emission vehicle sales in coming years. And they can buy credits from OEMs that are already meeting the terms of the ZEV Mandate, such as all-electric brands like Tesla and Polestar.

This year OEMs are required to ensure that 33% of their new car sales and 24% of their new van sales are zero emission, but these figures rise to 80% for cars and 70% for vans in 2030, and 100% for both from 2035. In the first six months of 2026, battery electric vehicles accounted for 25% of new car sales and 9.9% of new van sales, both figures well below the ZEV Mandate thresholds, despite the Government’s Electric Car Grant of up to £3,750 and Plug-In Van Grant of up to £5,000 per vehicle, allied to eye-watering manufacturer discounts.

The SMMT says OEMs have invested more than £12 billion in discounts to drive BEV uptake, yet three in four new car buyers are still not adopting the technology.

Richard Bruce, Director of the UK’s Office for Zero Emission Vehicles, acknowledged that there is a clear gap between the mandate’s ambitions and the current market for light commercial vehicles. Many fleets consider electric vans to be unfit for their duty cycles, said Bruce, due to range, payload and the cost and availability of suitable public charging.

“Ultimately, if the business case makes sense, then all the negative music about electrification fall by the wayside. If people make more money driving an EV van then they will,” he said at the BVRLA’s Fleets in Charge event.

Lisa Brankin, Chair and Managing Director at Ford Motor Company, said the differential between customer demand and the supply being forced by the ZEV Mandate was causing manufacturers issues, with the UK pursuing goals that are more ambitious than anywhere in the world. Norway never had a mandate, but its BEV sales are now above 90% because the country created a supportive ecosystem of policy support and charging infrastructure for electric cars.

“When we start discounting up front in the new market, that flows directly into the used market and puts everything under pressure. So, we just have a very stressed and pressurised market.”

Moreover, Government policy seems misaligned with its objectives – the Electric Car Grant being undone by the proposed eVED pence-per-mile road charging scheme for BEVs, and electric vans becoming subject to London’s Congestion Charge at the start of this year.

The SMMT, which represents vehicle manufacturers, said OEMs only want to see a change in the ZEV Mandate’s trajectory – abandoning the mandate would send the wrong message to consumers.

“The pace where we’re going at the moment, in terms of the mandate, is too far ahead of that underlying natural demand.”

The transition to BEVs would happen more quickly without the mandate, according to Eurig Druce, SVP & Group Managing Director Stellantis UK, who said a natural market would match supply to demand, delivering profitability to OEMs and residual value predictability to lenders. Without substantial reform, he added, the mandate is jeopardising manufacturing jobs in the UK.

“Either remove the mandate or reduce its trajectory to be much closer to where consumer demand is. That helps manufacturers. It helps consumers,” he said. “The supply of new vehicles cannot continue with the level of discounting that is happening in the market today, which means at some point that somebody’s going to have to pay. And it’ll probably be people in jobs, people who are paying their taxes in the UK who are no longer employed.”

But James Court, Director of Public Policy at Octopus Electric Vehicles, said the real issue for OEMs lies not with the mandate, but with the ferocious competition from Chinese car firms.

“If you fast forward to 2035, 2040, there is no expert that thinks that petrol and diesel cars are going to be the mass production vehicle they are now,” he said. “If you really want to keep car jobs in this country, the only thing you can do is double down on electric.”

Stimulating the supply of BEVs starts a virtuous circle that brings investment in battery gigafactories, manufacturing plants, recharging infrastructure, and even cuts the price of electricity by driving up demand for power, said Court.