ZEV Mandate changes explained

The government has announced changes to the Zero Emission Vehicle Mandate, which it says will make it easier for industry to meet the transition targets, whilst still remaining on trajectory to meet overall ambitions. We summarise the changes and find out how industry has reacted

Flexibilities have been included in the UK’s Zero Emission Vehicle Mandate, which the government says will support the automotive industry.
    
Part of the mandate’s revisions includes a confirmation that the 2030 phase-out date for new petrol and diesel car sales will be reinstated, but with the allowance for hybrid cars to be sold until 2035.
    
What’s more, all powertrains on vans, be it petrol, diesel, hybrid and or plug-in hybrid – will be permitted until 2035.
    
The government says the changes announced will strengthen its commitment to switch to electric vehicles while also introducing practical reforms to support the industry meet this target.
    
The revisions, which reflect a recent consultation, follow lobbying from some automotive companies and ‘crunch talks’ with the Department for Transport where car manufacturers voiced their concerns when it comes to selling an increasing proportion of electric vehicles, as they say demand is still low.
    
So what’s changed?

There is an existing flexibility for manufacturers to create ‘credits’ in the scheme by reducing emissions from their non-ZEV fleet compared to a 2021 baseline. This currently expires in 2026 but the changes to the mandate include extending this to 2029. The government says this will give “significant additional flexibility to reward CO2 savings from hybrids”. Caps will be included to ensure credibility, the government says.
    
The updated ZEV mandate will also include a new flexibility to introduce a van-to-car and car-to-van transfer for manufacturers who make both types of products. This will allow manufacturers who have overachieved against either the car or van targets to transfer excess credits to the other scheme to help achieve compliance.
    
One car credit will be exchanged for 0.4 van credits and one van credit will be exchanged for 2.0 car credits, a measure derived from relative mileage and CO2 emissions. This flexibility would be uncapped and available for the compliance year 2025 onward.
    
There is also an extension to the ability for manufacturers to ‘borrow’ credits. Currently, manufacturers can ‘borrow’ credits from the future if they don’t meet the mandate target in a particular year. This means that they can overachieve in a future year if they underachieve in a particular year. Overall, they have to sell the same number of EVs – plus a small increase to account for the fact that carbon saved later is less valuable. This ability has been extended to 2029.
    
The new measures will also exempt small and micro-volume manufactures, like McLaren and Aston Martin. These companies will be required to meet a “nominal” CO2 reduction across their fleets post-2030 which will be agreed with them.
    
What’s more, the government will decrease fine levels by £3,000 from 2025 from £15,000 to £12,000 (20 per cent less) for cars, and from £18,000 to £15,000 (18 per cent less) for vans.
    
How has industry reacted?

There is mixed reactions from the industry. Many of those representing the environment are understandably unhappy with the changes, while some representing fleets say it gives much needed “breathing space”. Others have raised concerns that increased flexibilities may de-motivate fleets to make the switch and that more needs to be done to drive demand.
    
Raising the environmental issues caused by allowing the longer sale of hybrids, Matthew Adams, head of transport and innovation at the Renewable Energy Association (REA), said: “With the Government saying in December that real world emissions for plug-in hybrids are 243 per cent higher than previously estimated, it is clear that a decision to allow their sale until 2035 does not benefit the environment, consumers or the air they breath.
    
“Meanwhile the strengthening of flexibilities mean there is now more uncertainty than ever over how many EVs will actually be sold each year. This means that we risk seeing the government make further concessions when they have to announce the fixed 2031-35 sales targets. Investors in the charging sector are watching. This is a terrible day for the environment, the charging sector and consumers.”
    
Dominic Phinn, head of transport at Climate Group, said: “The government is sticking to the 2030 phase-out for petrol and diesel cars – that’s the good news. But introducing flexibilities to legislation that is clearly doing its job confuses the market and hampers the roll-out of infrastructure.
    
“The UK’s ZEV Mandate is a global success story which turned the UK into a leader in the transition of road transport. If we want to keep it that way, the government should bring together the energy, charging, and public sector, together with the car industry, to speed up, not slow down, the UK’s charging and grid infrastructure. A competitive car industry will inevitably be driven by confident EV leaders, not by those asking for ever more flexibilities to a framework that’s designed to help them along.”
    
Tom Middleditch, head of electric mobility at Europcar Mobility Group UK, said the changes bring the automotive sector with some much-needed clarity and support at a very challenging time. “As one of the biggest customers of new vehicles, the rental industry needs a resilient and secure manufacturing sector,” said Tom.
    
“However, there is a concern that by reducing the pressure on manufacturers, businesses and private motorists will be less motivated to make the switch to zero tailpipe emissions,” Tom added.  
    
Talking about the vital role that rental vehicles can play in the EV transition, Tom said: “Sadly additional credits for EVs registered on rental fleets was not part of the announcement even though rental operators could play a more fundamental role, delivering an effective alternative to the bigger commitment of leasing or purchase for businesses and private motorists.”

Selling ICE vans for longer

Paul Hollick, chair at the AFP, believes that the changes provide a more realistic timeframe but that work needs to be done to ensure we’re not “kicking the can down the road.”
    
Paul said: “The big news here concerns vans. While electrification of the company car parc has its difficulties – notably around very poor residual values – van electrification is proving much more problematic, with many operators finding current vehicles simply unsuitable for their needs in terms of range, payload and cost.
     
“The new revisions create a degree of breathing space with diesel and hybrid vans available until 2035. This looks like a more realistic timeframe that will allow ongoing development of new vehicles and a process of adaptation by fleets. However, there still needs to be material, effective incentives for operators to make the transition to electric vans over time, otherwise there is a possibility we are simply kicking the can down the road. The ideas included in the Zero Emission Van Plan we created with BVRLA and others last year should especially be examined.”
    
Peter Golding, managing director at fleet software specialist FleetCheck, said “The fundamental issues that fleets tell us they are facing when it comes to electric van adoption are that the available vehicles are too expensive, don’t have adequate capacity for their needs, and lack sufficient range.
     
“The moves that the government has made don’t go far enough towards tackling these core problems. In creating a situation where diesel and hybrid vans can stay on sale until 2035, they’re potentially just giving fleet operators an excuse to continue using ICE vehicles and ignore the issue for a few more years.”
     
“We are likely to see electric vans become more suitable for fleet use over time and almost every month, we see incremental improvements to range and payloads, while prices are becoming more attainable. However, whether this is happening at a pace sufficient to overcome operator objections to these vehicles is very much open to question.
     
“In the company car sector, successful adoption has been powered by taxation advantages – especially zero or very low benefit in kind. There is nothing resembling the same level of assistance in the electric van market and, as a result, no real impetus for change.
     
“These revisions are all about supply but it’s arguable that the real problem lies with demand. We speak to fleet operators almost every day who are unimpressed by the prospect of electric vans to the extent that their current plan is to operate their existing diesel vans for as long as possible. More needs to be done to change this mindset.”
    
Michelle Gardner, deputy director – policy at Logistics UK agrees that the ZEV mandate changes do not address the practicalities of incorporating electric vans into commercial fleets.
     
She said: “Our members will welcome the clarity this announcement gives.
     
“The sector is fully committed to decarbonisation, but commercial vehicles are acquired and used very differently to cars, and zero tailpipe emission vehicles must make commercial and operational sense before businesses can incorporate them into fleets.
     
“There are still significant barriers preventing more widespread adoption, and our members cite increased vehicle costs, lack of usable public charging, the time and cost of installing infrastructure at depots and higher regulatory burdens.
     
“These are practical concerns that need to be addressed, and we continue to urge government to work closely with the logistics industry and give operators the confidence to invest in green fleets while ensuring the resilience of the UK’s supply chains moving and delivering the goods that we all rely on every day.”
    
Meeting the core commitment

When announcing the changes, Transport secretary, Heidi Alexander, said that the updated mandate will “back British business”. She said: “In the face of global economic challenges and stifled by a lack of certainty and direction for too long, our automotive industry deserves clarity, ambition, and leadership. That is exactly what we are delivering.
    
“Our ambitious package of strengthening reforms will protect and create jobs — making the UK a global automotive leader in the switch to EVs — all the while meeting our core manifesto commitment to phase out petrol and diesel [cars] vehicles by 2030.”
    
While the changes may provide breathing space for manufacturers and fleets alike, it does risk demotivating fleets from making the switch to zero emission vehicles, and the UK losing momentum in its transition to zero emission vehicle.