Rules on electric vehicle (EV) sales could change as part of a “fast track” consultation from the government.
Carmakers with factories in the UK have been urging the government to alter the rules, which they say set sales targets too high, because EV demand is not strong enough.
Business Secretary Jonathan Reynolds confirmed there would be a consultation on the so-called zero emissions vehicle (ZEV) mandate to give the car industry “clarity” in the coming weeks.
Under the current mandate, a percentage of the cars that firms sell must qualify as zero-emission.
EVs must make up 22% of a firm’s car sales and 10% of their van sales this year. For every car sale that pushes it outside of that mandate, they must pay a £15,000 fine.
There are flexibilities in the system, allowing manufacturers who can’t meet the targets to buy “credits” from those that can.
In practice, this means buying credits from companies such as Tesla or Chinese firm BYD, which build electric models exclusively.
Manufacturers argue that demand for electric cars has not been as high as was expected when the rules were drawn up.
As a result, to avoid fines, they say they are having to discount new vehicles heavily, or subsidise rivals that build electric cars only, none of whom have a manufacturing base in the UK.
Sales of electric cars have been increasing. In October, they made up nearly one out of every four cars registered. However, industry sources insist this is largely down to unsustainable discounting.
Addressing MPs on Tuesday, Reynolds said he did not think the rules around EV sales were working as intended.
“I don’t think green industrial policy should be protectionist but at the minute let’s be frank – what we have inherited is the opposite, it’s incentivising imports over domestic production,” he said.
Later, he told industry figures at the annual dinner of the Society of Motor Manufacturers and Traders (SMMT) that a consultation would be held on “flexibilities within the ZEV mandate”.
“We know you need certainty – and that’s why we will fast track that consultation, giving you clarity on the direction of travel and ensuring you have the answers you need in the coming weeks,” he said.
Reynolds also reiterated that the government remained committed to meeting Labour’s manifesto target of ending sales of new petrol and diesel cars by 2030.
At a meeting last week with Reynolds and Transport Secretary Louise Haigh, car firms called for more flexibility to be built into the regulations.
Nissan, which builds EVs at its plant in Sunderland, has said the rules are “undermining the business case for manufacturing cars in the UK, and the viability of thousands of jobs and billions of pounds in investment”.
Last week, its rival Ford announced it will cut 800 jobs in the UK over the next three years. It said this was partly because of weaker demand for EVs.
A number of options have been suggested to change the EV sales rules, including adding flexibility by allowing sales credits to be transferred between cars and vans, giving credit for British-made EVs sold abroad, or new incentives to encourage private buyers to choose EVs.
In its manifesto, Labour insisted it would bring forward the target date for ending sales of new petrol and diesel cars to 2030. It is understood that target is still seen as non-negotiable, and the annual quotas will not be changed.
While the government is willing to alter the mandate in other ways, it wants the industry to reach broad agreement on what those changes should be.
Haigh said earlier this month that the government will look at “flexibilities” but insisted that “the mandate will not be weakened”.