Keir Starmer eases pressure on carmakers to sell EVs in response to 'global economic headwinds'

Prime Minister Sir Keir Starmer has announced a relaxation of the rules on the phase-out of combustion vehicles, including confirmation that hybrid cars can remain on sale until 2035 and removal of penalties for carmakers based in the UK if they fail to hit tightening EV sales quotas.

The move is being touted as a way for the government to help the British car industry “in the face of global economic headwinds,” following he introduction of swingeing tariffs by American president Donald Trump, including a 25 per cent tariff on vehicles and vehicle components imported to the United States.

Here are the main points announced by the Department for Transport:

• The 2030 phase out date of new petrol and diesel car sales remains but carmakers will still be able to sell full hybrids such as the British-built Toyota Corolla and Nissan Qashqai ePower until 2035
• Small-volume brands — such as Rolls-Royce, Aston Martin and McLaren — are exempt from the mandate targets
• The fine for each non-electric car sold under the ZEV mandate quota drops from £15,000 to £12,000, and from £18,000 to £15,000 for vans
• Carmakers have been given more flexibility to avoid fines by making up for slow EV sales now with stronger sales later
• Extra investment in the EV manufacturing and charging network, on top of the £2.3bn already pledged
• Beneficial first-year tax rates for electric vehicles will continue — though there was no reversal of EVs registered from this month attracting the standard rate of VED (road tax)

Officially, the government says that it’s still sticking to its guns, and that the phase-out of new petrol- and diesel-engined car sales from 2030 is confirmed. However, the regulations surrounding hybrid-engined cars have been relaxed.

There was uncertainty over whether hybrids would have been banned along with other combustion cars in favour of pure-electric models from 2030, but with the global car industry now scrambling to respond to the new US taxes, and with new car buyers still cool at best when it comes to electric cars, full hybrids can now continue to be sold until 2035. 

It means that big-selling models such as the Nissan Qashqai e-Power, which is made in Sunderland, and the Toyota Corolla, which is made in Derbyshire, can remain on sale in the UK for at least the next decade. 

Targets remain but penalties relaxed

At the same time, the government has taken a leaf out of the EU’s book and has relaxed the imperative to hit specific levels of electric car sales each year between now and 2030. The ZEV mandate, as that regulation is known, had been putting significant pressure on carmakers to meet increasingly tough quotas for electric vehicles. They started in 2024 with 22 per cent of all new car sales, rising to 28 per cent this year and, by 2030, 80 per cent of new cars and 70% of new vans sold in Great Britain will need to be zero emission. In 2035 that figure will hit 100 per cent.

Electric vehicle sales are rising sharply. The UK was the largest EV market in Europe in 2024, and the third in the world with over 382,000 EVs sold — up a fifth on the previous year. But take-up is still lagging behind the targets, so the ZEV mandate rules have been relaxed; as with the EU’s changed regulations, the new ZEV mandate will allow car makers to underperform between now and 2026, with the intention of making up the numbers closer to 2030, when in theory demand for EVs should be higher.

There will also be a relaxation of the rules surrounding the transfer of carbon credits from EVs to combustion cars and vans. Experts believe this will reduce the need to buy credits from the likes of Tesla and incoming Chinese EV manufacturers.

At the same time, the government says that it is committed to supporting the car industry from both ends, in that it will “[press] on with tax breaks worth hundreds of millions of pounds to help people switch to electric vehicles” and that “support for the car industry will be kept under review as the impact of new tariffs become clear.”

Improvements to the charging network will also be supported, with the government pointing out that more than £6 billion of private funding is lined up to be invested in the UK’s charge point roll-out by 2030. Since July, the government says that it has also seen £34.8 billion of private investment announced into UK’s clean energy industries.

There will also be a new “modern Industrial Strategy” which the government says will “help British businesses realise the potential of industries of the future.”

‘Determined to back British brilliance’

The Prime Minister, Sir Keir Starmer, said: “Global trade is being transformed so we must go further and faster in reshaping our economy and our country through our Plan for Change.

“I am determined to back British brilliance. Now more than ever UK businesses and working people need a government that steps up, not stands aside. That means action, not words.

“So today I am announcing bold changes to the way we support our car industry. This will help ensure home-grown firms can export British cars built by British workers around the world and the industry can look forward with confidence, as well as back with pride.

“And it will boost growth that puts money in working people’s pockets, the first priority of our Plan for Change.”

Given that many of the UK’s best-known and most successful car makers are those which make cars in small numbers — such as Rolls-Royce, Morgan, Aston Martin and McLaren— these firms will be exempt from the new ZEV rules altogether. The government has said that the new rules will “preserve some of the UK car industry’s most iconic jewels for years to come.”

Vans with combustion engines will also be allowed to remain on sale until 2035, and the government has said that it is well aware that the motor industry is “a huge asset to our nation… employing 152,000 people and adding £19 billion to our economy.”

Consumers still need incentives to go electric

In response to the new mandate, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), which represents UK carmakers and dealers, said: “The government has rightly listened to industry, responded quickly to global dynamics and recognised the intense pressure manufacturers are under.

“Industry remains committed to decarbonising road transport, but the ZEV Mandate targets are incredibly challenging, especially with a paucity of consumer demand and geopolitical upheaval. Growing EV demand to the levels needed still requires equally bold fiscal incentives, however, to give motorists full confidence to switch.

“We await full details of the regulatory amendments but, given the potentially severe headwinds facing manufacturers following the introduction of US tariffs, greater action will almost certainly be needed to safeguard our industry’s competitiveness.

“UK-US negotiations must continue at pace, while the long-awaited industrial and trade strategies should prioritise automotive and be delivered at speed. In this vastly changed world, a package of measures is needed to support manufacturing, especially the supply chain, so our industry can deliver the economic growth, jobs and investment the country needs.”

Julia Poliscanova, senior director for vehicles and e-mobility supply chains at eco think-tank Transport & Environment, said: “The EV sales rebound shows that the existing target is working. Require carmakers to sell more electric cars and the buyers will come.

“It is a mistake to change the rules in the middle of the game. This must be the last flexibility carmakers are given. Let’s allow the 2030 and 2035 targets to do their work and bring affordable EVs and cleantech investment.”

Related articles

• If you were interested in the announcement from the UK government clarifying details of the ZEV mandate, you might like to read our review of a hybrid Alfa Romeo, the new Junior Ibrida
• Also check out this review of the 2024 Skoda Superb iV estate
• And don’t miss the reinvented Fiat (Grande) Panda

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