Urgent government intervention is needed to safeguard the UK automotive industry and protect the zero emission vehicle (ZEV) transition, says trade body the Society of Motor Manufacturers and Traders (SMMT).
In a headline announcement, the SMMT has warned car companies are facing a bill of almost £6 billion to meet the controversial ZEV Mandate in its first year of operation alone.
This requires 22 percent of all new cars sold to be electric in 2024. And the figure rises to 28 percent in 2025, then right up to 80 percent by 2030.
However, since the ZEV Mandate was announced two years ago, the assumptions on which it was based have not been borne out. In 2022, for example, the car industry anticipated 457,000 EVs would be registered in 2024, giving a market share of 23.3 percent.
However, so far in 2024, EVs have a market share of 18.7 percent in the UK – 94,000 fewer cars than anticipated.
The shortfall in electric car sales is despite an estimated (and unsustainable) £4 billion in manufacturer discounts, which have failed to stimulate consumer demand to the level required.
With a £15,000 fine for every car sold over target, car firms face an additional £1.8 billion in compliance penalties just for 2024 alone.
Compliance costs will only increase further in 2025. Furthermore, some of the payments UK producers have to make could end up going to overseas brands, such as Chinese firms and Tesla, who don’t build cars in the UK.
Things are even worse for electric vans. Despite a less onerous 10 percent target for 2025, even this is unlikely to be achieved, with a year-to-date mix of just 5.7 percent. Those selling vans are facing further billions in compliance costs.
‘The car industry is hurting’
“We need an urgent review of the automotive market and the regulation intended to drive it,” said SMMT chief executive Mike Hawes.
“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.”
ZEV Mandate needs adjustment
The SMMT is warning that compliance costs are already so formidable, it could force some brands to withdraw from the UK entirely.
With global manufacturers already making production cutbacks due to weak EV demand, this could lead to some investors “questioning the UK’s appeal as a manufacturing destination”.
An example of this was already seen earlier today, with Stellantis announcing plans to close its Luton van factory. The SMMT therefore wants the regulation to be “urgently” adjusted to meet market realities
It also wants to see rapid action to stimulate demand, which could involve the previously mooted idea of halving the VAT on new EVs.
This would help more EVs to reach UK roads, more quickly, helping the country meet its decarbonisation targets.
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