The Zero Emissions Mandate, introduced at the start of 2024 - applies to vehicles defined as those producing 0g CO2 per km in emissions, such as battery electric vehicles (often referred to as BEV or EV) and hydrogen fuel cell electric vehicles.
The ZEV Mandate Explained
When introduced in 2024, it mandated that vehicle manufacturers must have sold a minimum of 22% of their overall sales as EVs in 2024. The rates will then increase each year through to 2035 when all cars sold, must be zero emissions vehicles. The target for 2025 is 28%.
A fine of £15,000 applies for every car sold under that target (£9,000 for vans through to 2030 and £18,000 for vans between 2030 and 2035). It sounds tough and uncompromising, but there are caveats to help manufacturers reach these goals. The percentage figures are therefore often quoted without this context.
For example, there are two exclusions to the application of the ZEV mandate:
- Manufacturers that produce fewer than 1,000 non-compliant cars per year up to 2030
- Applicable cars must have a minimum range of 100 miles WLTP (World harmonised Lightweight Test Procedure)
In addition, there are flexibilities available to manufacturers to help avoid high penalties, such as:
- Buying EV credits from manufacturers that have a surplus
- Banking credits by the group manufacturer
- Borrowing credits from with the manufacturing group
- Trading credits with other manufacturers
- Pooling and disseminating credits around the group manufacturer’s brands
Did Manufacturers Reach the Target at the End of 2024?
It has since been reported that no manufacturers are facing fines thanks to a combination of successful registrations and sales, plus using the flexibilities at their disposal to mitigate a risk of fines. 1A
According to SMMT data, the uk market share for EVs was 19.6% for 2024 with December 2024 setting a record of 31% market share for EVs, so the trends are ramping up heading into 2025 where the mandate increases to 28%. 2A
The Headwinds in 2025
Vehicle Excise duty of £190 applies to all electric cars from 01 April 2025 based on the anniversary that the car was registered.
Additionally, the Expensive Car Supplement of £410 applies to electric cars from years 1-6 that have been registered on or after 01 April 2025 that cost £40,000 or above, including any options specified.
Note: the Expensive Car Supplement was introduced in 2017 and has not increased since its introduction.
Since the list price of electric cars is seemingly higher than internal combustion cars with a few exceptions, the Expensive Car Supplement may apply to more EVs and fewer internal combustion or hybrid cars.
It has been confirmed by Government recently that the phase out of pure internal combustion cars has moved forward to 2030 and hybrids and plug-in hybrids will be phased out by 2035, which shortens the previous EV phase-out deadline by 5 years.
So with the headwinds coming in April, and the internal combustion phase-out date being brought forward again, how will manufacturers mitigate these risks and reach these increased ZEV targets?
The Good News in 2025
The SMMT reports record fleet sales which include private and company lease as well as salary sacrifice lease, but they do not break this data down further. This is where these additional costs are often lost in low monthly instalments. Private sales are on a decline so the SMMT reports a significant shift away from outright ownership (or financed ownership) to leasing, which requires a smaller capital investment and smaller monthly instalments.
The salary sacrifice incentive scheme has not yet received an end date, and this is where leasing an EV is deducted from gross pay, losing the portion of tax applied to your salary. This works more in the favour of employees in the higher tax band.
The Expensive Car Supplement may also place a price squeeze on manufacturers to reduce their MSRP prices, which are often heavily discounted, so we could see movement there and more price parity with internal combustion and hybrid cars in 2025.
Lastly, manufacturers are collectively lobbying the government to assist further with the rollout of EVs. But the Government has already stated that the mandate percentages are fixed through to 2030, so what may we see from them?
Given the above note about the Expensive Car Supplement applying to all cars over £40,000 which hasn’t increased since 2017, manufacturers may have some leverage for that to be increased in-line with inflation over the last 8 years. That could increased the supplement to a higher starting price point.
We may also see some softening around the exemptions and also the flexibilities, too, as well as other initiatives. The devil will be in the detail.
However, a fresh consultation is now underway to see how the Government can further assist vehicle manufacturers to reach the targets and is set to close on 18 February 2025.
The ZEV Mandate Targets
Conclusion
EVs sales are ramping up smoothly thanks largely to the ZEV mandate. In fact, the UK is outperforming all European countries with electric vehicle registrations, with the exception of Norway.
The Government will undoubtedly make a few tweaks to the ZEV mandate details to further assist manufacturers into producing electric cars and to ensure they can avoid costly fines. This at a time when the EV market is hotting up with even more choice, with lower cost EVs and the Chinese introducing new and exciting brands to the UK and European markets.
