Banning hybrids from 2030 would have been 'too soon', says PM

It will follow up the revamped ZEV mandate with the unveiling of a "modern industrial strategy" in the summer, "which will help British businesses realise the potential of industries of the future".

The government is still attempting to negotiate a new trade deal with the US in a bid to neutralise the impact of the tariff, but ministers are drawing up a list of retaliatory measures that the UK could put in place in the coming weeks if it's unsuccessful. 

The government said: "Support for the car industry will be kept under review as the impact of new tariffs become clear."

SMMT chief executive Mike Hawes hailed the relaxations as a step in the right direction, saying: "The government has rightly listened to industry 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."

Hybrids to remain on sale past 2030

The government said that allowing hybrids to remain on sale until 2035 will "ease the transition and give industry more time to prepare".

Last month, there was a 37.9% year-on-year uptick in registrations of plug-in hybrids in the UK, and registrations of other types of hybrid (including mild hybrids) rose 27.7%, giving electrified cars a combined market share of 25%, compared with 20.7% for EVs.

Confirmation that full hybrids (HEVs) and plug-in hybrids (PHEVs) can stay in showrooms until 2035 comes five years after then prime minister Johnson said only some hybrids with an undefined "meaningful electric range" could continue until 2035.

The government has now said that both HEVs and PHEVs will now be allowed between 2030 and 2035, although it has yet to outline any specific technical requirements, instead listing some example models. It cited the Toyota Prius as one example of an HEV, although that model is currently sold exclusively as a PHEV in the UK. It also listed Nissan's e-Power cars, which are electrically driven but have a petrol engine on board serving as a generator to top up a small drive battery. 

The government said that from 2030, manufacturers will need to "make sure the overall CO2 emissions from their petrol and diesel cars is 10% lower than it was in 2021".

Autocar has contacted the Department for Transport for clarity on exactly what the new rules mean for mild hybrids, HEVs and range-extender electric vehicles (RExs or REEVs). 

Starmer said the sales of “efficient” petrol cars would also be encouraged up to their 2030 ban date. “Because we are not ideological about how we cut emissions, we are also going to ensure that cleaner efficient petrol cars sold before 2030 count towards your EV mandate," he said. "That will be good for British car manufacturers.”

Nonetheless, the announcement will come as a significant reassurance to car makers investing heavily in hybrid technology in a bid to decarbonise their line-ups amid slower-than-expected demand for EVs.

Toyota, for example, had previously threatened "there would be an impact on a number of areas" of its business in the UK if HEVs – like the Corolla it builds in Derbyshire – were banned from sale alongside pure-ICE cars in 2030. 

And Kia's UK boss Paul Philpott told Autocar recently that clarity on post-2030 hybrid sales "will help us make final decisions about product line-up during that period". 

The SMMT had previously urged the government to recognise "the role that all technologies – including hybrids, plug-in hybrids and hydrogen – have to play in decarbonising road transport, as either stepping stones towards, or full delivery of, a zero-tailpipe-emission market by 2035".

Meanwhile, the government has confirmed that pure-ICE vans can stay on sale through to 2035, along with hybrid and PHEV vans. 

The fines for missing the ZEV mandate targets have also been reduced, from £15,000 to £12,000 per car for each manufacturer that misses the target.

Starmer said the changes to the mandate will help British car manufacturers “be at the forefront of the electric vehicle revolution”, adding: “These targets have to work for British manufacturers and I do not want companies like [JLR] to pay any fines or buy credits from foreign manufacturers.”

Any money raised from fines “will be invested directly back in support for the British car industry” he added. He did not confirm in what capacity this money would be used.

Ford UK boss Lisa Brankin said: “The government’s response to the substantial ZEV mandate consultation is a small step in the right direction, but it is not the giant leap required to address the especially challenging electric vehicle market conditions.

"While Ford welcomes the introduction of new flexibilities to help alleviate financial penalties and confirmation that hybrid technologies will continue to be permitted beyond 2030, we await the full details to assess their actual benefit.

"Ford has invested billions in product development, manufacturing and marketing to bring a full range of electric vehicles to customers. What the UK needs are real incentives to help consumers make the switch to electric mobility.”

Low-volume car makers exempt from rules

The revisions to the ZEV mandate also include a new exemption for "small and micro-volume" manufacturers from the ZEV targets and the new 2030-2035 hybrid requirements, so they now don't need to follow mainstream firms in achieving an 80% EV sales mix in 2030.

The government cites McLaren and Aston Martin as specific examples of companies that will be granted the exemption, but the 'small-volume' definition applies to any firm producing fewer than 2500 cars per year for the UK market.

The decision will help with "pressing some of the UK car industry's most iconic jewels for years to come", said the government. 

Currently, neither Aston Martin nor McLaren sells an electric car, and the former recently delayed the launch of its first EV in favour of a new line of PHEV sports cars.

This exemption will give those two companies – along with Bentley, Rolls-Royce, Lotus and LEVC – more time to transition their customers from ICE cars to EVs.

The exemption will also apply to ultra-low-volume sports car manufacturers – including Morgan, Caterham, Ariel, Radical, BAC and GMA, none of which have an electric car in production yet.

Morgan boss Matthew Hole recently told Autocar that time was fast running out for his company to develop an EV by 2030 and called for urgent clarity on whether it would be obliged to.

He said there was "just way too much ambiguity" around the rules of the ZEV mandate for low-volume firms and said Morgan's forward strategy was fully contingent on whether it would be exempt from the need to achieve an 80% EV sales mix in 2030.

More flexible EV sales targets

While the headline targets of the ZEV mandate are unchanged, meaning manufacturers must still achieve a 28% EV mix this year and 80% by 2030, the government has made it easier for them to achieve compliance by making the Non-Zero Emission Car CO2 Trading Scheme (CCTS) more flexible.

This scheme essentially allows manufacturers to offset sales of non-electric cars by exceeding their CO2 reduction targets and earns them a lower mandated EV sales mix target in a given year. 

One important change to the CCTS is that car makers can now benefit from the credit-transferring mechanism through to 2029, having previously only been able to spend these credits in the three years to 2026.

This enables "significant additional flexibility to reward CO2 savings from hybrids" over the next five years, said the government. 

It will introduce caps for each year but hasn't yet said what these will be. 

Meanwhile, the mechanism of 'borrowing' EV sales credits from future years will now be possible through to 2030, having previously been set to end in 2026. 

This means a car maker can underperform against its ZEV target in a given year if it compensates for that the following year - although there will be caps imposed upon this too. 

Car makers are currently only allowed to 'borrow' up to half of their mandated 28% EV sales mix in 2025, and in 2026 that will go down to 25%.

Finally, manufacturers will now be able to trade credits between vans and cars: a credit for selling one electric car can be exchanged for 0.4 electric van credits and an electric van credit can be exchanged for two cars.

These flexibilities have been welcomed by Stellantis (owner of Vauxhall, Peugeot, Fiat, Citroën and several more).

UK MD Eurig Druce said the decision "helps Stellantis in continuing to be compliant" given the "challenging geopolitical operating environment and increased intense pressure on automotive industry".