Guy Bird
The 2030 ban on new car sales of petrol and diesel-engined vehicles in the UK as part of ambitious laws to reduce domestic greenhouse gases has been well-publicised for several years. But the Government’s Zero Emission Vehicle (ZEV) Mandate designed to galvanise the industry into making steady progress towards that 2030 moment – and by doing so, giving certainty to those investing in the associated charging infrastructure ramp-up – seems less widely known, especially given it could become law from January 2024.
The Mandate proposes 22% of new UK car sales by brand in 2024 must be zero-emission (defined as able to drive 120 miles on electric power only). This percentage will then increase in significant leaps every year until 80% by 2030. While there is overall logic to the proposal, given some months last year when full-electric new car sales did reach or exceed that percentage, those sales were dominated by only a few brands – Tesla, MG and VW among them – and far from evenly spread among the varied locations and customer bases of UK’s diverse dealer network.
The proposed penalty for any brand that doesn’t meet the target in 2024 is a massive £15,000 for every car that doesn’t qualify and £18,000 for every van. Alternatively carmakers will need to purchase ‘EV credits’ for likely slightly less than those sums, from other brands (like EV-only Tesla) that have a surplus, based on the number of their EV sales that exceed the 22% threshold. Either way, it’s a massive potential financial burden that could seriously hamper profits on current sales and impede future investment in cleaner models.
Take Jaguar Land Rover as just one high-profile British example. According to SMMT data, Land Rover sold 43,180 vehicles in 2022, none of which qualify as ZEVs. A full-electric version of the Range Rover is due in 2024, and sister brand Jaguar still has the now ageing I-Pace EV, but the latter only sold 7307 in 2022 (down 27% on 2021) and is five years old, so it’s not clear whether those two models could collectively meet 22% of total UK JLR sales in 2024. JLR did not respond directly on this point, preferring this vague and rather cagey answer: “The ZEV Mandate proposal gives a few pathways for OEMs to achieve the targets and we are confident on that basis.”
Within the small print of the Mandate’s proposal, carmakers will be able to ‘borrow’ a limited number of ZEV credits from future years’ allowances if they can’t comply in the early years of the scheme – by which time some carmakers will no doubt hope to have many more EVs to sell to be able to surpass their targets. But this approach will still garner penalties via interest at 3.5%. Additional credits might be gained by deploying ZEVs for public-access car clubs and more, but either way, JLR and many other brands selling in the UK with currently underdeveloped EV ranges, look very exposed (see the NFDA’s EV projections graph based on 2022 sales for evidence).
The knock-on implications for dealers are several, with some experts fearing carmakers will artificially restrict the supply of petrol and diesel cars, and possibly also boosting EV supply beyond what the natural market can stand, to get the right percentage of EVs at their year’s end to avoid fines. This will leave dealers the unenviable task of trying to sell too many high-cost new EVs at a time when demand is on the wane for various reasons, as highlighted by John Wilmot, CEO of car leasing comparison website LeaseLoco. “Many EVs are still too expensive, despite manufacturers cutting prices,” he says. “Higher energy costs and substantially lower petrol and diesel prices since last summer mean people aren’t as motivated to switch to reduce running costs.”
To stimulate the market, some brands are calling on UK Government grants for electrified vehicles – removed in June 2022 – to be reinstated, given that 21 countries across Europe still offer such incentives. “There’s no doubt the government’s Plug-in Car Grant successfully kickstarted the UK’s electric car revolution – it supported the sale of nearly half a million electric cars,” says Fiat UK’s md Damien Dally. “We also appreciate it refocusing funding towards one of the main barriers to the electric vehicle transition, public charging. However, with the cost-of-living crisis and rising cost of electric vehicles, coupled with our net-zero climate targets, we believe more needs to be done to incentivise individuals to be able to afford to make the switch. That’s why we’ve taken it upon ourselves to launch the Fiat E-Grant, a £3,000 incentive towards the 500e and 500e Convertible.” If that helps Fiat’s dealers sell more EVs and the OEM take fewer fines, £3000 per vehicle could seem like a small price to pay.
More EV charging infrastructure is also needed to stimulate sales, especially in certain regions. As of 31 January 2023, there were 37,055 charge points in the UK, but only 366 or 1% located in Northern Ireland. For comparison, Scotland has 3915, Wales 1657 and Greater London 12,817. As Sue Robinson, chief executive of the NFDA added: “Charging infrastructure across the UK remains the main issue on the showroom floor when dealers are advising customers on their next choice of vehicle.” The NFDA is also lobbying for the percentage increases in the mandated EV sales mix each year to be smoother and more feasible – especially for vans – while still reaching the Government’s 2030 eventual target (see NFDA graphs from its consultation response).
All of these factors will have a knock-on effect in weaker used EV values and servicing, where dealers traditionally can make much of their profits. The Institute of the Motor Industry (IMI) says only 11% of UK motor technicians are currently qualified to work safely on EVs despite a quarter of new cars sold by the end of 2022 having a plug (PHEV or EV). The EV-savvy technician count may be up 4.5% up on 2020 but there is still a massive gap which the IMI says could create a serious issue as early as 2027, if EV sales rise in line with the ZEV Mandate’s timeline.
Thus the IMI is renewing its call for a £15m boost from the Government to get the predicted 75,000 technicians required by 2030 ready. As Steve Nash, CEO of IMI says: “While manufacturers and their franchised dealers are committed to EV training, lack of funding means independents risk being left out in the cold and this skills premium risks consumer choice being restricted and EV servicing costs rising. Fiscal support would not only help re-skill existing technicians, but also help attract school leavers and career changers into a sector which has an increasingly diverse attitude to recruitment.”
What’s next? The latest ZEV Mandate consolation ended in late May and the Government is due too respond by the end of summer. This autumn the proposals will have to go through parliament swiftly to become law in time for a January 2024 start. Brass tacks, the ZEV Mandate is a big deal for the UK motor industry and we’ll endeavour to keep dealers informed of the upcoming changes, in whatever final form they take.
Guy Bird is a regulator contributor to Motor Trader