Catch-22%: How carmakers can meet UK EV targets without selling more EVs
New briefing shows how carmakers can meet the UK's EV sales targets without having to sell more electric cars
The UK’s EV sales targets have been in the news this week, and it has been widely reported that carmakers will struggle to meet the targets that are in place. Our new briefing explores other ways carmakers are able to comply with the targets.
Key points
Manufacturers do not need 22% of their car registrations to be battery electric in 2024 to meet targets
The UK’s EV targets allow multiple routes to compliance - including a reward for selling more fuel efficient cars
UK EV registration data alone are not a reliable way to judge whether targets are being met
Introduction
The UK has set ambitious goals for reducing vehicle emissions, aiming for 22% of new car registrations in 2024 to be electric as part of its Zero Emissions Vehicle (ZEV) mandate. It has been widely claimed that the car industry is not on track to meet these targets. By the end of October, electric vehicles (EVs) made up 18.1% of new car registrations. But thanks to the flexibility built into the ZEV mandate, carmakers can meet their 2024 targets without necessarily increasing electric car registrations. This briefing unpacks the unique structure of the mandate, including how carmakers earn “points” that allow them to comply with emissions goals in ways beyond simply boosting EV registrations.
The ZEV Mandate: Points, not Cars
Since January 2024, most carmakers who sell cars in Great Britain are required to meet targets as part of the Vehicle Emissions Trading Schemes Order 2023. This regulation sets annual electric vehicle registrations targets that gradually increase to reach full zero-emission car registrations by 2035. Achieving these targets is not simply a matter of reaching a certain percentage of EV registrations. Instead, the mandate revolves around the concept of allowances, or credits, which carmakers can earn in different ways to demonstrate compliance. These credits are like the score in a competition, so we will refer to them as “points”.
For 2024, carmakers need to obtain a number of points equal to 22% of their total car registrations in Great Britain. While EV registrations naturally earn points, companies can also earn points through improvements in the emissions performance of their petrol, diesel or hybrid cars, offering a different path to compliance.
Two Ways to Gain Points
Selling Electric Vehicles
As expected, carmakers earn a point for every electric vehicle they sell. These points accumulate toward their annual compliance requirement, encouraging manufacturers to increase the percentage of EVs in their lineup.
Improving Emissions Performance in Conventional Vehicles
Carmakers can also earn points by selling cleaner conventional cars. Each manufacturer has a baseline for the emissions ratings of their conventional cars, typically set at the average emissions of its registrations in 2021. For every vehicle sold that is even 1g CO₂/km more efficient than the baseline, a carmaker earns a small fraction of a point.
The size of the fraction is based on the average emissions of a conventional car, set at 167g CO₂/km. This means that small reductions in emissions ratings allow a company to accumulate points as if part of its registrations were zero-emission vehicles, even if they aren’t fully electric.
Example: StellarMotors Ltd.’s Dual Path to Compliance
To see this system in action, consider a fictional car manufacturer, StellarMotors Ltd., which sells 100,000 cars in the UK in 2024. Because the target is 22% StellarMotors Ltd. must obtain 22,000 points. It sells 18,000 electric cars, earning StellarMotors 18,000 points. The company still needs an additional 4,000 points to reach its target. Fortunately as well as selling more EVs, StellarMotors Ltd has promoted its most fuel efficient models, reducing the average of the emissions ratings of all its conventional car sales.
StellarMotors’ average conventional car emitted 190g CO₂/km in 2021. By 2024 it has reduced this figure to 181g CO₂/km, because it sold more lightweight models than in 2021. This 9g (4.7%) improvement over the baseline qualifies the company for 4,419 additional points. Their total points is now 22,419 - higher than the 22% target, despite not selling extra EVs.
“Real” EV registrations Targets Come Down as Emissions Performance Improves
One strategy that carmakers will likely adopt to meet their targets will involve selling an increased number of hybrids and plug-in hybrids, which have very good emissions ratings, to effectively reduce their real battery electric car registrations requirements. If a carmaker can generate points by selling more hybrids and plug-in hybrids, it reduces the number of points they need to generate in other ways, such as selling more battery electric cars. We can therefore talk about a ‘real’ target that is lower than the 22%.
UK Conventional Cars Are Polluting Less
The average new car registered in 2022 was 1.2% less emitting than that of 2021. In 2023, that improvement on 2021 levels grew to 3.2%, and cars registered in the first quarter of 2024 were 4.7% less polluting than in 2021. This makes it highly likely that carmakers will be awarded points that they can use for ZEV mandate compliance.
Limits on Points From Emissions Performance Improvements
While improving conventional emissions ratings offers a temporary flexibility, this option is capped. In 2024, points earned through emissions improvements can only make up 65% of a carmaker’s target, with this cap decreasing over the next few years until emissions performance-derived points are phased out entirely by 2027. In practice, this means the furthest manufacturers can lower their 2024 targets using this mechanism is from 22% to 10.85% in 2024, from 28% to 18.9% in 2025 and from 33% to 26.8% in 2026. This gradually pushes manufacturers toward full electrification by making non-EV compliance options less impactful.
Why This Flexible System?
The ZEV mandate’s dual-pathway design aims to balance two competing needs: reducing emissions immediately while allowing the car industry time to scale up electric vehicle production and infrastructure. In the short term, this flexibility incentivises carmakers to improve emissions wherever possible, while still preparing for an inevitable shift to fully electric car registrations by 2035.
How Else can Manufacturers Get Points?
There are a number of other ways that manufacturers can get points. They can “borrow” points, if they believe that they will sell significantly more EVs in the future. They can trade points between each other, in return for financial payments. However, we believe the main methods to obtain points will be the two outlined in this briefing - selling EVs and selling more fuel efficient cars.
Conclusion
The UK’s ZEV mandate uses an approach that allows carmakers multiple ways to meet targets, especially in the early years of transition. By permitting compliance through both EV registrations and conventional car emissions ratings improvements, the mandate supports steady emissions reductions while easing the industry’s immediate pressures to scale up EV production. However, as the mandate tightens and these emissions-based points are phased out, carmakers will need to accelerate their EV offerings to meet future targets. This two-pronged approach underscores the careful balance between achieving urgent emissions reductions and moving toward a fully electric future.