Zero Emission Vehicle Mandate: April 2025 updates

The Government has released details of several changes to the terms of the Zero Emission Vehicle (ZEV) Mandate.

Today’s (07 April) ZEV Mandate consultation response focuses on supporting OEMs by altering the flexibilities they have to meet the Mandate targets. While the ZEV Mandate headline figures remain unchanged, the proposed increases to flexibilities are significant: OEMs can now meet 90% of their ZEV Mandate obligations in 2025 through CO2 credits, double the 45% allowed previously. The targets are now more symbolic and less painful for OEMs.

While the ZEV Mandate consultation has been a long process, the impetus for the document today was the tariffs introduced by the US on UK automotive exports. The Prime Minister set out this package of changes from a JLR factory in the Midlands, citing JLR as the "leading exporter of goods" and that manufacturers can expect him to "...back you to the hilt" in the face of tariffs. The consultation response suggests that demand-side measures, if they are to come at all, will be at a later stage through the industrial strategy or spending review outcomes.

Details of what was announced today are set out below:

Demand

How to drive demand for EVs was a key question within the consultation and was where the BVRLA focused its response. The association’s response highlighted the challenges faced in the used market, by the rental sector and those looking to transition to electric vans (e-van).

The BVRLA’s asks

These focused on three main asks:

• A used BEV grant for cars and vans
• Extend the car club credit to rental, and
• Reduce the costs of charging – public and private

There were several other asks relating to support for the used market, for rental and to support e-van adoption as well as to retain the existing benefits that are working for leasing.

The government response

It is disappointing that the Government response does not address these main asks. Whilst it has acknowledged that the van market is in need of support and has allowed maximum flexibilities (more on this below), it has not committed to anything that would help drive demand for e-vans i.e. increase the minimum range requirement suggested in the BVRLA’s submission.

In relation to the ask on extending the car club credit for rental – the response states that “there will be no new bonus credits at this stage, but the government will consider extending credits to vehicles with ‘vehicle to grid’ charging capabilities in due course”. This suggests that expanding the car club credit to the rental sector is not taken any further at this stage.  

The only mention of the used market was where the government recognised that “a buoyant second-hand EV market is necessary to advance our ambitions to increase ZEV uptake” and that the “government will continue to monitor the health of the used market and keep all policies under review”. The BVRLA will continue to push this critical issue.

More widely, the response is aimed at UK vehicle manufacturing, stating that the government “will work closely with the British automotive industry to ensure that the economic opportunities of ZEV manufacturing are felt across the whole of the United Kingdom for generations to come.”

Next steps

If further announcements are to come, they are expected to be linked to the modern industrial strategy and spending review, both due this summer.

Flexibilities

The consultation was largely focused on what flexibilities there should be, which would support vehicle manufacturers avoid having to pay hefty fines, and whether the time limits for the existing flexibilities – banking and borrowing – should be extended.

The BVRLA consultation position:

The association did not comment on the time limits for the flexibilities but used this as an opportunity to flag areas which would help the sector:

• Extension of the car club credit to rental
• Commitment from Government to reinvest ZEV Mandate fines into UK charging infrastructure
• OEM credits for investment in myth busting/PR/infrastructure/production facilities
• UK-manufactured ZEVs sold into UK should get more credits

In answer to the question on cross trading between the car and van trading schemes, the BVRLA supported van-to-car transfers.

The government response

A series of flexibilities will be introduced to enable multiple pathways to support manufacturers in the transition, whilst maintaining the existing headline ZEV targets. The Transport Secretary Heidi Alexander also noted in her statement to Parliament that “Where fines are levied…the revenue will be recycled directly back into support for the sector”.

The flexibilities that have changed include:

• an increase and extension to non-ZEV to ZEV CO₂ transfer, finishing in 2029, with increased 2025 and 2026 caps to provide additional short-term flexibility subject to further engagement with industry on detailed legislation
• an increase and extension to borrowing for cars and vans, finishing in 2029, with increased 2025 and 2026 caps to provide additional short-term flexibility subject to further engagement with industry on detailed legislation
• implementation of a bidirectional car-van transfer mechanism from 2025, at an exchange rate for ZEV car-ZEV van of 0.4, and for ZEV van-ZEV car of 2, subject to further engagement with industry on detailed legislation
• a reduction to non-compliance payments from £15,000 to £12,000 per car allowance, and from £18,000 to £15,000 per van allowance, subject to further engagement with industry on detailed legislation

Next steps

In the longer term, the Government will explore and seek views on more innovative credit models. For example, it will consider models that seek to incentivise vehicles with bidirectional charging capabilities, allowing the vehicle to be used as a battery pack for domestic energy use, either directly to home or as part of wider grid balancing.

Post 2030 and what will be allowed for sale

The Labour Party's commitment to return the phase-out date to 2030 (from 2035) brought the question of what would be allowed from 2030 to 2035 back into play. When announcing this change, the wording reflected a change for cars, indicating there would be more flexibility for vans – something the BVRLA had been calling for some time.  

The BVRLA Position:

When asked about what should be allowed from 2030 to 2035 the BVRLA stated:

• Cars: PHEVs and HEVs plus a CO₂ cap (not specified) – this would allow maximum flexibility, particularly for rental members who are seeing limited demand for BEVs
• Vans: In recognition of the challenges operators face when converting to electric vans, the BVRLA asked for maximum flexibility and for diesel to be accepted until 2035 with no additional definitions or new CO₂ measures for vans beyond 2030

The government response

Cars

The government will permit the sale of Hybrid Electric Vehicles (HEVs) and Plug in Hybrid Electric Vehicles (PHEVs), alongside ZEVs in the 2030 to 2035 period.

Alongside a technology definition for HEVs and PHEVs, the government will apply a non-ZEV fleet average CO₂ cap post-2030. This will require a 10% reduction of a manufacturer’s new non-ZEV CO₂ emissions compared to the 2021 baseline.

The view is that, given purely petrol and diesel cars will no longer be part of a manufacturer’s fleet, a 10% reduction will reduce carbon emissions without placing excessive burdens on vehicle manufacturers.

The government will consult further on the detailed regulatory approach for requirements post-2030.

Vans

Considering the current and future van products that will be available, there will be no technology requirements for new non-ZE vans, from 2030 to 2035, with ICE vans able to be sold alongside ZEVs and hybrid vehicles.

The government will retain the existing CO₂ requirements for new non-ZE vans, as per the existing Vehicle Emissions Trading Scheme.

No additional CO₂ reduction requirements for vans will apply from 2030.

This is in line with the BVRLA ask, and the association hopes to see it followed by swift action on the regulatory barriers around 4.25t e-vans.

Next steps

The government will continue to work to define regulatory mechanisms for the continued ZEV transition post-2030, including technology definitions for non-ZEV cars and vans, and non-ZEV fleet CO₂ reduction requirements. These will be subject to further consultation prior to implementation.

The government will create a Utility Factor flexibility, allowing PHEVs to use the current CO₂ value for the purpose of Vehicle Emissions Trading Scheme (VETS) compliance for the duration of the ZEV Mandate. This will mean that PHEVs still have a large contribution to CO₂ savings and a big impact on cross-trading CO₂ for ZEV credits, even if the Utility Factors are introduced in the UK.