THE Government has announced a relaxation of the ZEV mandate, partly following consultation with stakeholders and partly as a response to the tariffs imposed by the USA.
Labelled ‘backing British business’ to support British car makers, the keypoints are:
- 2030 ban on petrol and diesel cars remains in place
- But hybrids and plug-in hybrids can remain on sale until 2035
- Petrol and diesel vans can be sold until 2035
- Credit swaps possible for electric cars and vans produced with 2 credits for each van
The changes allow increased mandate flexibility for OEMs up to 2030, so that more cars can be sold in later years when demand is higher, said the Government.
The change, allowing hybrid cars, will help UK-based manufacturers such as Toyota and Nissan “to help ease the transition and give industry more time to prepare”.
In a statement, the BVRLA said:
“The headline targets – that stipulate the percentage of a vehicle manufacturer’s annual vehicle sales that must be for zero-emission vehicles – are not due to change.
“Changes instead focus on some of the flexibilities that provide alternative routes to compliance. These include relaxing the limits of how many non-ZEV registrations can be transferred by a manufacturer to compensate for a shortfall of ZEV registrations.”
While CEO Toby Poston added on LinkedIn: “This pragmatic announcement releases the safety valve on the ZEV Mandate targets, making them more symbolic and less painful.”
What impact will this have on the PCH sector?
With a private sector still wary about converting to full electric, the relaxation of the ZEV rules to include hybrids, will no doubt be welcome.
Mike Lloyd, Managing Director of Central Contracts which specialises in personal leasing, said:
“As a broker enjoying a significant level of personal contract hire business, we welcome the moves announced by the Government in respect of the ZEV mandate. The extension of hybrid sales combined with greater flexibility in the penalties that manufacturers will potentially incur and the emphasis on improving charging infrastructure should combine to increase take up of alternative fuel vehicles by private individuals.
“While we recognise that the upheaval caused by the imposition of international trade tariffs by the US makes any future predictions very challenging, anything that the Government can do to deliver long term certainty to the sector is most welcome. It’s very difficult for manufacturers to make long term investment plans without a degree of certainty.”
However, the benefit of a more flexible approach to the ZEV mandate, may be a double-edged sword as Lloyd appreciates:
“The potential downside is if the pressure is off OEMs, they might respond by reducing the level of available discounts.”
Will the changes slow down business take up of EVs?
It’s not hard to see this announcement through the lens of the personal driver, who is still without the benefits of the tax breaks afforded business drivers for EVs and wary of the higher prices of EVs and the technology change – unless they go via salary sacrifice.
But there is a downside to this for those brokers in the business sector, as Gofor CEO Graham Lesslie (pictured above) accepts. He told Broker News:
“First and foremost, I was critical of the previous Government’s decision to postpone the petrol and diesel ban to 2035, so I credit this Government with providing the greater certainty that the fleet and wider automotive sector need by reinstating 2030 as the ZEV mandate deadline.
“Furthermore, our sector, and indeed our country, is far from immune from the wider, global economic turbulence we’re seeing just now, so I can understand the introduction of greater flexibility around annual EV manufacturing targets and the lowering of fines as a rational evolution of the original ZEV mandate.
“That said, it’s important to recognise that this does open the door to a slowing of the EV transition. Our role, as a provider of fleet solutions and electric cars and vans to businesses across the UK, is to continue to support these businesses in achieving the level and pace of EV adoption they need as we build towards 2030 and beyond.
“This will include educating businesses with the information they need to trust the EV transition and providing the data and solutions to enable this, from EV policy to the growing range of cars and vans available to them, to the Government funding available, and more.
“There’s always more that can be done here. Our ask of the Government is to consider levers such as the freezing or maintenance of low EV BiK rates to give businesses further certainty regarding their EV transition and to keep a razor-sharp focus on the charging infrastructure, making this as accessible as possible to drivers the length and breadth of the UK.”
The opportunity to lower VAT on public EV charging to 5% the same as home use, for example, seems a simple and easy win that’s been missed.
Has the van sector been dealt the biggest reprieve?
While meeting the EV mandate for cars has already proven a tricky target for OEMs, the target for vans is even more challenging.
So extending the availability of combustion engined vans in a declining LCV market must be a good opportunity?
Peter Golding, Managing Director at FleetCheck, said the Government would almost certainly have to make further revisions in the future to create momentum behind van electrification.
“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,” he said, adding that it was giving operators an opportunity to ignore EVs for longer.
Andrew Hurst, Director of van broker specialist Global Vans (left), was more forthright:
“There’s no major benefit here. There is a lack of fit for use product and we can’t see that this will change too much in five years and to get to 70% remains a tall ask.
“The result will be a hold back by fleets and we will see older vehicles on the road and manufacturers having to hold back diesel / petrol vans in balance of how many EV vans they can sell. Whilst the technology is around, the manufacturers will choose to put this into cars where higher margins are available. Lastly the used market is not mature enough and therefore costs of adoption are high and funders are crystal ball gazing when setting residuals. I think that the Government will have to relax more in time.”
So a mixed view on the changes to the ZEV mandate – the potential for greater impact on personal leasing as consumers move slowly towards electrification; a possible slowing in the rate of electrification in the business sector – although BIK rates remain firmly in favour of EVs – and a postponement of the real issues facing the LCV sector’s ability to decarbonise.
There’s plenty of education still to be done, that’s for sure. But what the market really needs is greater acceleration of product availability that’s more suitable to the demands of consumers, and to business fleets whether company cars or LCV fleets.
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Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
