Pressure Mounts on UK ZEV Mandate Amidst Growing EV Market

The UK’s ZEV mandate faces calls for change in 2025

The UK’s zero-emission vehicle mandate is under renewed scrutiny. Some manufacturers argue the sales targets are too aggressive and compliance costs are mounting too quickly. However, the market shows strong growth in battery-electric vehicles. Carmakers collectively exceeded the 2024 targets. This creates a split picture: policy pressure is rising, but sales performance suggests the transition is gathering pace.

The question now is whether the current framework needs adjustment or whether the evidence supports keeping the trajectory intact. For businesses operating vehicle fleets, tendering for public contracts, or managing supply chains with transport emissions, the outcome will affect capital planning, compliance obligations, and procurement criteria over the next five years.

How the ZEV mandate sets rising sales targets through 2030

The zero-emission vehicle mandate requires manufacturers to sell a minimum proportion of zero-emission cars and vans each year. For passenger cars, the threshold was 22% in 2024. It rises to 28% in 2025, 33% in 2026, and reaches 80% by 2030. Vans follow a separate but parallel schedule.

The regulation applies to all manufacturers selling vehicles in the UK. Those who fall short of the target face fines of £15,000 per non-compliant vehicle. Alternatively, they can buy compliance credits from manufacturers who exceed their quota, trade banked credits from previous years, or borrow against future performance.

The sharpest increase comes in 2028, when the passenger car target jumps to 52%. Industry groups have identified this step as a critical pinch point. The concern is that the pace of demand growth, charging infrastructure rollout, and consumer confidence may not align with the regulatory curve.

The Department for Energy Security and Net Zero introduced the mandate under the Zero Emission Vehicle Mandate 2024 regulations. It replaced the voluntary phase-out commitment announced in 2020 with a binding legal framework. Compliance is monitored annually, with manufacturers reporting sales data to the Driver and Vehicle Licensing Agency.

Flexibilities built into the system include the ability to bank credits earned in over-performing years, borrow up to 20% of the following year’s target, and earn credits for vehicles emitting less than 50g CO₂/km until 2027. These mechanisms are designed to smooth short-term volatility, but they do not change the long-term trajectory.

Manufacturers exceeded 2024 targets despite industry warnings

In 2024, carmakers collectively surpassed the mandate’s requirements. Passenger car compliance reached 24.3% against a 22% target. The van market hit 11.5% against a 10% goal. This means the first year of the mandate delivered higher zero-emission sales than the minimum threshold.

The Society of Motor Manufacturers and Traders reported that battery-electric car registrations grew by more than 21% year-on-year in 2024. Battery-electric van sales also increased. The compliance figures include credits from low-emission hybrids and banked credits, but the underlying sales growth is measurable and sustained.

Nevertheless, manufacturers have said the cost of meeting the targets was significant. The SMMT estimated compliance costs across 2024 and 2025 at over £10 billion. This figure includes the cost of discounts, incentives, and pricing adjustments used to stimulate demand, as well as the cost of credits purchased from other manufacturers.

Some carmakers have publicly stated that they are selling electric vehicles at a loss to meet regulatory requirements. Others have said they are using profits from petrol and diesel models to subsidise zero-emission sales. This cross-subsidy model creates pressure on margins, particularly for volume manufacturers without a luxury brand portfolio.

Meanwhile, hybrid vehicle sales have remained strong. Plug-in hybrids and full hybrids continue to attract buyers who want lower emissions but are not ready to switch to full battery-electric. However, hybrids will not count toward the ZEV mandate after the current transitional credits expire.

The debate now centres on whether targets rise faster than infrastructure and demand

The core tension is between the pace of regulatory targets and the real-world conditions shaping consumer behaviour. Manufacturers argue that charging infrastructure, electricity grid capacity, and vehicle affordability are not advancing at the speed required to support the 2028 and 2030 thresholds.

Charging infrastructure remains a concern for many fleet operators and private buyers. Public charging networks have expanded, but availability in rural areas, residential streets without off-street parking, and motorway services is still uneven. Businesses running mixed fleets report that depot charging is manageable, but en-route charging for long-distance operations remains a planning challenge.

Vehicle pricing is another factor. Battery-electric models are typically more expensive to purchase than petrol or diesel equivalents, even after accounting for lower running costs. Businesses making capital budgeting decisions must weigh upfront cost against total cost of ownership, residual values, and tax treatment under capital allowances.

Tax incentives have supported adoption. Company car tax rates for zero-emission vehicles remain at 2% of list price for the 2024/25 and 2025/26 tax years, compared with rates of up to 37% for high-emission models. This creates a strong financial case for employees choosing salary sacrifice schemes or employers providing pool cars.

However, tax incentives alone do not resolve the infrastructure question. Businesses tendering for public sector contracts under Procurement Policy Note 06/21 must demonstrate carbon reduction plans. Vehicle electrification is often part of that plan. Consequently, the ZEV mandate indirectly shapes tender competitiveness, even for businesses that do not manufacture vehicles.

For SMEs, the transition affects procurement budgets, fleet replacement cycles, and facilities planning. Installing workplace charging points may require electrical upgrades, grid connection applications, and compliance with building regulations. These costs are separate from the vehicle purchase but are necessary to make electrification viable.

The government plans a 2027 review but says the mandate stays in place

The Department for Energy Security and Net Zero has confirmed a formal review of the ZEV mandate will take place in early 2027. This review will assess whether the targets remain appropriate, whether compliance flexibilities are working as intended, and whether market conditions justify any adjustment.

Ministers have also said that preparatory work for the review should begin earlier to identify potential pressure points before they affect investment decisions. This suggests some acknowledgement that the step change to 52% in 2028 requires careful monitoring.

The government’s position is that the mandate is working. Officials point to the 2024 compliance data as evidence that manufacturers can meet the targets when the market is properly supported. They also emphasise that the UK needs to maintain momentum if it is to meet its legally binding net-zero commitment by 2050.

Industry groups have called for the review to consider whether the targets should be eased. The SMMT has proposed flexibility to slow the rate of increase if infrastructure or demand does not keep pace. Some manufacturers have suggested aligning UK targets more closely with the European Union’s CO₂ standards to avoid competitive distortion.

No change to the current trajectory has been announced. The 28% target for 2025 remains in force. Businesses planning fleet transitions should assume the existing schedule applies unless the government publishes revised regulations following the 2027 review.

What this means for UK businesses managing vehicles and carbon reporting

• The ZEV mandate requires manufacturers to sell a rising share of zero-emission vehicles each year, reaching 80% for cars by 2030, with the sharpest increase to 52% in 2028.
• Manufacturers exceeded the 2024 targets, achieving 24.3% compliance for passenger cars against a 22% requirement, showing the market is responding to the regulation.
• Industry groups estimate compliance costs across 2024 and 2025 at over £10 billion, citing discounts, incentives, and cross-subsidies used to meet the thresholds.
• The government plans a formal review in early 2027 but has confirmed the current targets remain in place until then, with preparatory work starting earlier to identify risks.
• Charging infrastructure, vehicle affordability, and grid capacity are the main concerns raised by manufacturers who say the pace of targets may outstrip real-world readiness.
• Company car tax rates of 2% for zero-emission vehicles and carbon reduction plan requirements under PPN 06/21 are driving fleet electrification decisions across UK businesses.

Fleet replacement cycles and carbon reduction planning require early decisions

Businesses with vehicle fleets should review replacement cycles now. The ZEV mandate does not directly regulate fleet operators, but it changes the supply of new vehicles. Manufacturers are prioritising zero-emission models to meet their quotas. This means petrol and diesel options may become less available or less competitively priced as the decade progresses.

For businesses tendering for public sector contracts, carbon reduction plans often include commitments to electrify transport. Demonstrating credible progress on those commitments requires alignment between procurement budgets, infrastructure planning, and vehicle availability. Waiting until 2028 or 2029 to begin the transition may leave insufficient time to meet tender expectations.

Capital allowances under the Annual Investment Allowance and the 100% first-year allowance for zero-emission vehicles provide immediate tax relief. However, these allowances are subject to HM Treasury policy and may not remain at current levels indefinitely. Businesses making multi-year investment decisions should factor in the risk of policy change.

Charging infrastructure planning should start before vehicle orders are placed. Grid connection applications can take several months, especially for sites requiring new substations or upgraded transformers. Businesses operating from leased premises should also confirm landlord consent for electrical works and clarify responsibility for ongoing electricity costs.

Scope 3 emissions reporting is becoming more common, even for businesses not yet subject to mandatory carbon disclosure. Many large customers now ask suppliers to report transport emissions as part of procurement due diligence. Fleet electrification reduces Scope 1 emissions if you own the vehicles, or Scope 3 emissions if you lease them. Either way, it improves your carbon profile in customer assessments.

For businesses using carbon reporting support to meet PPN 06/21 requirements, vehicle emissions are typically one of the most visible and measurable categories. Switching to zero-emission vehicles creates clear, quantifiable progress that strengthens your carbon reduction narrative. It also simplifies data collection, as electricity consumption is easier to meter than fuel purchases across multiple drivers.

The ZEV mandate creates a predictable timetable for vehicle supply, even if demand remains uncertain. Businesses can use that timetable to structure fleet planning, budget allocation, and infrastructure investment. The 2027 review may bring changes, but planning on the basis of current targets is the prudent approach until revised regulations are published.

Where to find official guidance and ZEV mandate updates

The Department for Energy Security and Net Zero publishes the full text of the Zero Emission Vehicle Mandate regulations and periodic updates on compliance data. You can access these documents on the Department for Energy Security and Net Zero website.

The Society of Motor Manufacturers and Traders publishes monthly sales data, including breakdowns by fuel type and vehicle category. This data provides the clearest view of market trends and compliance performance. Visit the SMMT website for registration statistics and industry analysis.

For businesses assessing the tax treatment of zero-emission vehicles, HM Revenue and Customs publishes guidance on company car tax rates, capital allowances, and benefit-in-kind calculations. The relevant pages are available at gov.uk/HMRC.

Businesses working through carbon compliance and reporting obligations can also find support through the SBS advisory team. Understanding how fleet emissions fit into your wider carbon footprint helps prioritise investment and align vehicle strategy with regulatory expectations.