U.K. EV Rules Threaten Chaos For Locals, Success For China

U.K. EV Rules Threaten Chaos For Locals, Success For China.

“Industry is on track to meet the ZEV”, government says

Mandate European electric vehicle manufacturers are making huge losses in Britain and want the government to dilute the rules, which call for an EV market share of 80% by 2030. Manufacturers say this target is impossible and unless modified, Chinese companies will dominate the market and force bankruptcies and job losses for the locals.

 Major global automakers have written off approximately $65 billion in losses over the past six months, driven by a costly pullback from over-ambitious EV strategies. The surge in write-offs was led by Stellantis, which announced a $26 billion hit. 

European governments have determined that EVs have a key role to play in the fight against climate change and instead of letting consumers drive the market, they mandated quotas to force an eventual monopoly.  

 Mobile phones didn’t solve environmental threats or have a moral angle so government influence was never a factor. Manufacturers just competed to produce the most attractive and affordable product. The results were clear. Huge sales, with no subsidies required.

Imagine a world where EVs were just seen as the vehicles of tomorrow, and global automakers competed to develop them with products that would seduce buyers with their looks, utility and price. Manufacturers would have noted that EVs had very powerful but limited advantages. Forget long journeys speeding down autoroutes to the sun. EVs would make ideal little town cars, catering for maybe 90% of driving needs. With small, cheap batteries, they would be perfect for local commuting, school and shopping runs. They would have, say, 100 miles of range and a top speed of 60 mph, seat two adults and two children and cost about £10,000 ($13,000) after tax. Would there not have been a stampede to buy them?

Over-priced behemoths
Unfortunately for British and European (and U.S.) automakers, governments decided that autos were key elements in the fight against climate change, electric cars were the answer, and the industry must eliminate the internal combustion engine by 2035. Manufacturers were panicked into action and tried to adjust the designs of traditional ICE vehicles as the quickest way to meet these targets. Horrendous, bottom-line destroying penalties would follow if missed. 

This led manufacturers to produce over-priced behemoths, really traditional vehicles with batteries attached. They couldn’t match the all-round abilities of ICE vehicles and only sold because of huge subsidies from governments, massive losses from manufacturers, and tax concessions to persuade company vehicle purchasers to buy them. Private buyers were thin on the ground. 

In Britain, the current market share of EVs is just over 20% and government edicts demand 33% this year, 38% in 2027, 52% in 2028, 66% in 2029 and 80% in 2030. From then on, the sale of new ICE vehicles is banned, with hybrids allowed until 2035. These targets are absurd but perhaps could be attained by the sudden appearance of affordable mass-market vehicles. Unfortunately, there’s no sign of them so far. 

Automakers operating in Britain are demanding action from the government to slow down its so-called ZEV (zero emission vehicle) mandate. Global brand giant Stellantis has led the call. Emanuele Cappellano, Stellantis Europe COO, said manufacturers are losing lots of money because there is no natural consumer demand for EVs and car companies are burning cash as they slash prices to induce sales, hoping to avoid the existential threat of fines. Stellantis brands selling in Britain included Peugeot, Citroen, Fiat, Jeep, Vauxhall, DS and Alfa Romeo. Meanwhile, Chinese companies, with their 30% plus cost advantage are already capturing big chunks of the market. 

The British government shows no sign of conceding any ground, saying there will be a review in 2027.

Make the rules more flexible, follow the EU
Professor David Bailey of Birmingham Business School wants the U.K. government to follow the EU and make the rules more flexible. The EU has already announced the softening of some targets on the way to banning new ICE car sales by 2035. Instead of a 100% ban by 2035, the EU wants to cut this to 90%, although this includes some big hurdles which may limit this concession to the likes of Ferrari or BMW’s Rolls Royce.

“Shifting the effective phase out of new ICE-only vehicles from 2030 to 2035 would not represent retreat. It would represent realism. Five years in industrial and transport policy terms isn’t capitulation; it’s breathing space. It would allow ministers to focus the remainder of this decade on the fundamentals rather than defending an increasingly brittle milestone which had anyway been plucked out of the air as a target date,” Bailey said. 

“Supply-side pressure has moved faster than demand-side readiness. Dealers report growing stock levels, discounting is becoming deeply structural, and some manufacturers face the prospect of penalties not because they lack EVs, but because customers are hesitant to buy them. And fining the firms making the investment in EVs was never a good idea,” Bailey said.

British automotive analyst Dr Charles Tennant agrees European automakers were lax in failing to cater for the mass market. Generous tax breaks pushed up demand for expensive EVs. 

“Now we are getting perilously close to some very draconian targets for U.K. electric car sales – 38% in 2027 and 52% in 2028 and 80% by 2030, with harsh fines for manufacturers that fail to deliver. Meanwhile Chinese car manufacturers are getting a good footprint within the U.K. and EU with their high technology, but crucially much lower cost electric cars,” Tennant said.

Existential threat
“This must be an existential threat to European car manufacturers, and the Chinese haven’t really started yet – they have big plans to set up manufacturing plants over here and have deep pockets to enable this.”   

Tennant said, ironically, it is Chinese companies who are going to benefit from the EU and U.K. sales targets.

“Their only answer seems to be to lobby for an extension on the EV sales targets,” Tennant said.

Peter Wells, Professor of Business Sustainability at Cardiff Business School agrees that urgent action is required. 

“The industry is certainly in an existential moment, with problems compounding almost daily and with no obvious solutions in sight either for senior automotive management, politicians, or regulatory agencies in the U.K. or more widely. It is no surprise that the SMMT and government ministers are at a loss over what to do next. Even the automotive industry has little collective sense of where its best interests lie,” Wells said.

SMMT wants change but won’t elaborate
The SMMT, the Society of Manufacturers and Traders, is the U.K. auto industry’s lobby group.  It has supported the U.K. government’s ZEV policy for years, despite probably being at odds with some of the country’s biggest manufacturers. The SMMT is now also demanding the rules be reviewed, saying they stand against geopolitical and economic reality. The targets are unrealistic, the SMMT said, but declined to suggest what changes it supported.

Wells said the U.K targets look challenging, to say the least, although the industry has invested in required smaller and cheaper EVs. Wells suggested a series of steps including – 

• Establish local content rules for Chinese manufacturers.
• Establish more nuanced support for EVs that aligns more closely with economic, transport, urban and social policies. 
• Accelerate and support the training of technicians to support EV use. This would include bringing together all participants to drive down insurance costs and make battery pack repairs viable.
• Accelerate and support the second use and recycling of those battery packs that are beyond repair after use in the cars.
• Institute a study into establishing the ‘best’ number and type of cars that would provide for long-term societal needs in the context of a comprehensively better transport system.

Professor Bailey said a single, unambiguous commitment to 2035 would be clearer for the U.K. than clinging to 2030. 

“The electric future is not in doubt. That is clear. But the timetable must match the terrain. Climate leadership isn’t measured by how aggressive a headline date appears. It is measured by whether policy survives contact with voters and markets. A transition that collapses into backlash helps no one: not drivers, not manufacturers and not the climate,” Bailey said.

The U.K. government shows no signs of conceding. In theory, its 80% mandate for 2030, which becomes 100% the year after, could be achieved by doing nothing. Even if EV sales didn’t rise much, the withdrawal of ICE cars because of huge losses would do the job, but at a horrendous cost to the industry and the workforce.

Britain comments
Britain’s Department for Transport was asked to comment. 

“Industry is on track to meet the ZEV Mandate and push forward with the transition to electric. Last year, we introduced flexibilities to make it easier for manufacturers, who can now comply in several ways – not just through ZEV sales.”

“We’re investing over £7.5 billion ($10 billion) to support electric vehicle manufacturing and the rollout of chargers across the U.K. We’re also backing the industry by boosting sales through our Electric Car Grant, helping over 75,000 drivers buy a new EV and save up to £3,750 ($5,000),” a spokesperson said.