Electric cars in the UK

The UK government has been keen to promote the adoption of electric cars. The last government introduced the Zero-Emission Vehicle (ZEV) mandate, seeking the end of new petrol and diesel cars by 2030.

Following representations by some in the automotive industry and others, the government amended the phase-out date for petrol, diesel and hybrid cars to 2035, in line with more countries in the European Union (EU). This still entailed tough targets for the industry to meet to accelerate new battery car sales. The method chosen was put into law and came into effect in January of this year. The industry is falling behind this target already and is asking the government to come to its aid. The ZEV mandate requires 22% of all car sales by major manufacturers to be electric vehicles (EVs) this year to escape punishing fines of £15,000 per model. This rises to 80% by 2030.

Currently dealers are offering large discounts on electric cars to try to make more sales. This often makes the manufacture and sale of an electric car unprofitable. They are encountering considerable resistance from individual buyers who remain concerned about range, recharging, battery life and costs. The fleet market is more active, partly due to a better range of tax incentives including first-year allowances and a favourable company car tax regime. Companies often pay employees to install a home charge for a company working vehicle.

Many individual cars are bought under lease arrangements. The leasing companies have been worried by the larger falls in second hand values of battery cars compared to those powered by the internal combustion engine. Some second-hand car buyers are concerned about battery life, given the high costs of battery replacement. This may change when there is more history about battery life and as more buyers of second-hand electric cars emerge.

The new government wants to tighten the rules

Some manufacturers are reviewing their investment plans for the UK as they do not welcome the extra costs of staying here and selling petrol, and diesel cars with the penalties. They would like a relaxation of the penalties, or a much more generous package of support to try to get more people to buy battery cars. Some in the industry and the government argue that speeding the transition to all battery cars could make more people buy them and could reassure an industry being asked to make large investment commitments to replace its petrol and diesel ranges with EVs. Others point out that requiring a faster transition does not make people buy more electric cars and could increase the problems manufacturers face trying to hit the targets.

The Labour Party has said it would restore the earlier target of selling no more petrol, and diesel cars by 2030. So far in office it has said: “The government has committed to phasing out new cars that rely solely on internal combustion engines by 2030 and that from 2035 all new cars and vans sold in the UK will be zero emission.” This implies that it will still be possible to buy new hybrid vehicles for the five years 2030-35. The industry is seeking clarification on this point and whether there will be limitations or definitions of what an ‘acceptable’ hybrid looks like.

If the government decides to allow various types of hybrid vehicle for another five years, these are likely to be popular with a public still worried about the range and charging issues of the all-battery car. Many of the vehicles already exist, so it would allow manufacturers to recoup more of their investment in these models by producing them – or modified versions – for longer.

The government wants to up EV promotion

The government is acting to accelerate the number of charger points available across the country. It is aware that people undertaking long journeys often find it difficult to reach a charging point, or find it is in strong demand with long waiting times when they reach one.

It plans “to invest over £200m in 2025-26 to accelerate EV charge-point rollout, including funding to support local authorities to install on-street charge points across England. This will build on the UK’s existing charging network, which continues to grow at pace, with more than 70,000 public charge points.”

There is a desire for more businesses to work from battery-powered vans. It is “providing £120m in 2025-26 to support the purchase of new electric vans via the plug-in vehicle grant and to support the manufacture of wheelchair-accessible EVs”. The state offers a £2,500 grant for small plug-in vans, and £5,000 for bigger vans. Businesses are allowed a 100% first-year tax allowance for a van purchase.

The government is continuing tax incentives for cars. The government is “maintaining tax incentives to purchase electric cars through Vehicle Excise Duty first-year rates and the Company Car Tax regimes, as well as by extending 100% first-year allowances for electric cars and charge points for a further year.”

Supporting the UK car manufacturers

The past and present governments have worked to attract and retain car manufacturing investment in the UK through the transition.

In September 2023, BMW announced that it would make some electric Minis in Oxford, by committing to build Mini Coopers and the Mini Aceman there. The company had previously said electric Minis would be built in China through its venture with Great Wall Motors. It is likely China will still be the dominant source of new battery Minis, with the higher-volume, lower-priced models. Germany will build the Mini Countryman.

Jaguar Land Rover announced last year plans to build a large battery gigafactory in Somerset and has said it will make some electric cars at Halewood.

Ford stopped all car and vehicle assembly in the UK some time ago and closed its Bridgend engine plant. It plans to invest in electric-motor production in Halewood with battery car assembly in Romania and Turkey.

Honda withdrew from Swindon and its Turkey plants to concentrate more production in Japan.

Nissan now has two electric cars in development in the UK, as it will need electric models to replace its successful Sunderland output.

Stellantis is making electric vans at Ellesmere Port but has been worried by the pace of change and the lack of customer support for battery cars. It said in June that it may need to close its UK factories if things did not improve for the electric future.

The government will be reluctant to relax the targets for more battery car sales given its previous pledges and its strong commitment to a fast transition. It will also be aware of the difficulty of sustaining investment and output in UK car manufacturing, given the strong draw of China and other lower-cost centres to produce EVs. Ministers will be under pressure from the trade unions to do more to avoid factory closures and compulsory redundancies.

It points to them taking further action to hasten the roll out of chargers and to tilt the tax and regulatory playing field further in the direction of battery vehicles. It may compromise on the 22% target by allowing offsets for exports and or factory improvements in carbon-dioxide reduction.

It is constrained by budget pressures from being much more generous with subsidy to either consumers or producers of EVs, given the substantial package of measures already in place.

The UK and other advanced European economies are likely to lose more assembly work because of the shift to battery cars. The UK also needs to attract more investment in battery production, which is a significant proportion of the cost of an EV. Being able to make the batteries locally helps attract assembly investment.