Reaching the same destination by a smarter route

SMMT: Zero Emission Vehicle Mandate’s cost to industry cannot continue indefinitely, writes Mike Hawes

In an increasingly uncertain global automotive landscape, market stability and trusted trading relationships matter more than ever. They underpin investment, competitiveness and the delivery of ambitious regulatory targets that were designed around very different assumptions – namely a flourishing global market, falling costs and strong consumer demand. 

As we heard at a sold-out SMMT Electrified conference yesterday, those assumptions no longer hold. Longstanding global partnerships are under strain and cost pressures have intensified, placing unsustainable burdens on an industry striving to deliver decarbonisation.

Headline figures – that the UK has the largest EV market share of any major European economy, that the EV passenger car market grew by nearly a quarter last year, that vehicle manufacturers all complied with the ZEV Mandate in 2024 – don’t tell the full story.

Manufacturers have no choice but to comply whether that is through consumer subsidy, payments to competitors or – perhaps – compliance payments to government. But the cost is phenomenal. Since the introduction of the ZEV Mandate, industry has provided more than £10 billion in vehicle discounts alone to help stimulate demand beyond its natural level. That scale of intervention is simply unsustainable – particularly as current realities differ so starkly from the optimism that shaped the mandate in 2021.

As analysis in a new SMMT report, Same Destination, Smarter Route, published yesterday shows, battery costs are now around 30% higher than expected in 2021, while industrial energy costs are 80% higher. EVs are still 17% more expensive than petrol and diesel equivalents, with once-projected price parity by 2025 still some distance away. Public charging costs are up more than 120% – and even higher on the ultra-rapid network. Add in eVED (Electric Vehicle Excise Duty), to be introduced just as mandate targets steepen most sharply, combined with the eye-watering cost of ZEV mandate compliance, and it is a bitter recipe for sustaining – never mind attracting – global investment in the UK.

Government has committed to a review of the Mandate, but waiting until 2027 is not an option. The gap between ambition and natural market demand continues to widen so the review must happen now, and it must lead to swift resolution – this year. Get it wrong and we risk damaging an industry that is vital to the UK economy and, crucially, undermining the very decarbonisation ambitions we all share.

At this critical time, industry and stakeholders must come together to address the challenges and find practical solutions. We were pleased that SMMT Electrified welcomed influential speakers from government, OEMs, global suppliers and related sectors, such as energy, infrastructure and insurance. We live in an increasingly fractured world, but collaboration and dialogue will underpin our long-term success and that is what we must all now focus on to safeguard the UK’s future.

Mike Hawes is chief executive of the Society of Motor Manufacturers & Traders (SMMT)