UK automotive decarbonisation must not mean deindustrialisation

Under the ZEV mandate, UK automotive manufacturers have a legal obligation to ensure that a certain percentage of vehicles they make each year are ZEVs, with that percentage expected to grow on a yearly basis until the ban on the sale of new petrol and diesel cars takes effect in the UK in 2030. Hybrid vehicles will still be permitted until 2035. From then, all new vehicles in the UK will need to be zero‑emission.

The ZEV mandate is the subject of a forthcoming UK government review, which parliamentary under-secretary of state for transport Kier Mather told conference delegates is set to begin preparatory work later this year. The outcomes of the review are not anticipated until sometime in 2027.

As industry awaits the result of the review, uncertainty grows. As a result, there were industry calls – during a discussion involving representatives from Toyota, Volvo, Jaguar Land Rover, Stellantis, and Autotrader magazine – for the government to complete its review sooner, with panellists highlighting how businesses are already making investment decisions for beyond 2035 without yet being clear about what technology they will be able to sell in the UK at that point.

There is also a clear sense from some within industry that there is a disconnect between the products they are forced to sell to keep pace with the ZEV mandate and those products that consumers actually want.

Lisa Brankin, Ford UK chair and managing director of the Ford of Britain and Ireland National Sales Company, called on the government to recalibrate the pace of change and to recognise the role plug-in hybrids can play in achieving its broader aims of decarbonising transport. She said the cost of purchasing electric vehicles (EVs) remains the primary barrier to take-up and said that UK fiscal policy needs to support, not work against, the transition.

In that regard, attention was drawn at the conference to the results of a recent survey of around 12,000 motorists, which found that 55% would be deterred from transitioning to an EV by the UK government’s plans to introduce a pay-per-mile charge. Those plans, due to take effect in April 2028, were set out by UK chancellor Rachel Reeves in her November 2025 budget. The charge is to serve as a long-term replacement for the income the UK Treasury obtains from fuel duty, imposed on petrol- and diesel-powered vehicles.

Cost has not been the only factor in dissuading some consumers from taking up EVs. ‘Range anxiety’ has also been a long-standing concern, but there was optimism that with the latest models being brought to the market commonly being able to be driven 500 miles before needing recharged, this issue will become less significant for consumers over time.

Another factor that plays into consumer decisions is the availability – and cost – of high-speed EV charging facilities. In his speech, Mather said the government is looking at the planning system to unlock home charging and acknowledged the need to upgrade the public charging network. He stressed the government’s determination to support consumers in making the switch to EVs – and that this will be backed by a government campaign.

The consensus from industry at the SMMT conference, however, is that the government must go further.

Jan Kohlmeier, managing director of MAN Truck & Bus UK Ltd, was one of the industry figures at the event who cited particular challenges associated with decarbonising trucks. He cited insufficient public charging infrastructure for HGVs, high energy costs, and delays in both the planning process and in the time it takes for new charging infrastructure to obtain connections to Britain’s electricity grid, as systemic problems.

Kohlmeier called on the government to develop a national strategy for HGV charging corridors, deliver faster grid connections for depots, and develop a clear framework for infrastructure funding responsibilities, among other things.

DHL Supply Chain’s Ian Macaulay, decarbonisation programme lead for the company in the UK and Ireland, highlighted further challenges around the length of contracts on offer to logistics customers. He said the current industry norm of average three‑year contracts often don’t justify the upfront investment needed in infrastructure, technology and decarbonisation, whereas longer contracts give suppliers the certainty to invest and innovate.

If transport agreements start becoming longer term contracts, for in‑house lawyers, the challenge is structuring these longer‑term partnerships to unlock value while still protecting flexibility through robust governance, termination and risk‑sharing mechanisms. Both transport providers and buyers need to adapt and potentially re-think strategic partnerships moving forward.

Others highlighted the need to reduce EV insurance costs – which were said to be at least 25% higher than equivalent petrol- or diesel-powered vehicles. Those additional costs are associated with insurers’ lack of confidence in skilled repairs of batteries and their perception that EVs will therefore require  a complete battery replacement instead of a battery repair.

Volkswagen group board member Martin Sander, who is responsible for sales, marketing and after sales at the company, warned that businesses involved in the servicing of vehicles in the automotive sector will need to rethink their business models since battery electric vehicles (BEVs) require significantly less servicing. He said UK companies can learn from how businesses in Scandinavia, where EV take-up is greater, have adapted.

Sander said innovation in relation to autonomous vehicles will also have disruptive effect on the UK automotive industry. This is because it is expected the roll-out of autonomous vehicles will lead to market segmentation, with fewer consumers buying cars and instead making use of services under mobility-as-a-service business models run by fleet operators. If this change materialises – and Sander said consumer ownership could fall as much as 50% in the more pessimistic scenarios – it would have a material impact on asset utilisation, business models of how cars are sold, who they are sold to, and on second-hand markets.

The UK government was also urged to reconsider its approach to supporting innovation in respect of hydrogen-powered vehicles. Dr. Jürgen Guldner, general program manager for hydrogen technology at BMW, said that while it may be harder to enable uptake of hydrogen-powered vehicles at the beginning, it should become more cost-effective for governments to do so over time. Unlike home EV charging, hydrogen refuelling cannot be done domestically, meaning infrastructure must be built before demand can develop. Panellists highlighted how the EU has already legislated to build infrastructure for alternative fuel technology – and urged the UK to follow suit. 

Industry’s eyes will now be on the government to see how it responds to its concerns amidst fears that the cost of decarbonising will come at too high a price for UK automotives that it pushes the industry to move manufacturing to other jurisdictions.

Co-written by Ioana Chiva of Pinsent Masons.