UK Automotive Industry Warns Government: EV Targets and New Trade Rules Could Threaten Jobs, Investment and Vehicle Supply

The Society of Motor Manufacturers and Traders (SMMT) has issued one of its strongest warnings yet, calling on the Government to urgently review its Zero Emission Vehicle (ZEV) Mandate and address looming trade barriers with Europe that could significantly impact the UK’s automotive sector.

Speaking at the SMMT International Automotive Summit in London, Chief Executive Mike Hawes said immediate action is needed to protect one of Britain’s most important manufacturing industries, warning that rising costs, slowing electric vehicle demand and new trade challenges are creating significant uncertainty for manufacturers and suppliers alike.

Manufacturers say EV targets are running ahead of demand

At the centre of the debate is the UK’s Zero Emission Vehicle (ZEV) Mandate, which requires manufacturers to ensure an increasing percentage of new vehicles sold are fully electric.

While manufacturers remain committed to achieving net zero emissions, the SMMT argues that consumer demand is not increasing quickly enough to meet the Government’s timetable.

According to the organisation:

• Every automotive business leader surveyed believes the UK is currently behind the trajectory needed to achieve the 2030 phase-out of new petrol and diesel cars.
• Nearly three-quarters believe the market is significantly behind schedule.
• Manufacturers have already spent more than £12 billion discounting electric vehicles to encourage sales.

Current battery electric vehicle (BEV) market share remains well below future mandated targets.

From January 2027 manufacturers will be expected to achieve:

• 38% BEV sales for new cars
• 34% BEV sales for new vans

Current market performance sits at approximately:

• 23.9% for cars
• 9.5% for vans

Without changes, manufacturers argue they will continue absorbing enormous financial costs simply to comply with legislation.

Why this matters to garages

Although the ZEV Mandate affects vehicle manufacturers directly, its impact is likely to be felt across the entire automotive industry.

Independent garages and MOT centres could see:

• Slower replacement of the UK’s ageing vehicle parc if new car prices rise.
• Longer retention of petrol and diesel vehicles.
• Continued strong demand for servicing and MOT testing of internal combustion engine vehicles.
• Increasing pressure to invest in EV servicing equipment and technician training while EV volumes remain below expectations.

The pace of the UK’s vehicle transition has significant implications for workshop planning over the next decade.

EU trade could become another major challenge

Alongside concerns over EV targets, the SMMT has highlighted two significant trade issues affecting UK manufacturers.

The first involves proposed “Made in Europe” procurement rules from the European Commission.

The SMMT warns these proposals could make many UK-built vehicles less competitive across European markets unless UK-built products receive equivalent recognition under the scheme. Around 83% of UK automotive business leaders believe the proposals would negatively affect their operations.

£1.4 billion tariff threat from 2027

A second concern centres on the post-Brexit Rules of Origin contained within the UK-EU Trade and Cooperation Agreement.

From January 2027, stricter battery sourcing requirements are due to come into force.

Unless both sides reach a new agreement, many electric vehicles traded between the UK and EU could become subject to 10% import tariffs.

The SMMT estimates this could:

• Cost manufacturers around £1.4 billion during 2027 alone
• Put approximately £16.4 billion worth of UK-EU electric vehicle trade at risk
• Increase vehicle prices for consumers
• Reduce competitiveness for UK-built vehicles in European markets.

Energy costs remain a major concern

The report also highlights rising business costs across the sector.

According to the latest Automotive Business Leaders Barometer:

• 93.5% of businesses reported worsening employment costs.
• 84.8% experienced higher input costs.
• Around 70% believe reducing industrial energy costs would deliver the biggest improvement to competitiveness.

Despite recent Government support through the British Industrial Competitiveness Scheme (BICS), UK industrial electricity prices remain considerably higher than many European competitors.

Industry welcomes Government support, but says more is needed

The SMMT has welcomed several recent Government initiatives, including:

• £4 billion of DRIVE35 funding
• Electric vehicle purchase incentives
• Industrial electricity support
• New international trade agreements
• Continued backing for autonomous vehicle legislation

However, it believes these measures will not achieve their intended impact unless accompanied by wider reforms to improve competitiveness and encourage EV demand.

Mike Hawes: “The window for action is closing”

SMMT Chief Executive Mike Hawes said the UK automotive industry remains capable of delivering economic growth, innovation and decarbonisation, but only if Government policy reflects market realities.

He argued that reviewing the ZEV Mandate should not be viewed as weakening environmental ambitions, but rather ensuring the transition remains commercially achievable while protecting jobs, investment and future manufacturing.

He warned that delaying decisions risks further uncertainty at a time when manufacturers are making long-term investment choices.

What happens next?

The coming months are likely to prove critical for the UK automotive industry.

Key issues to watch include:

• Possible Government review of the ZEV Mandate.
• Negotiations with the EU over Rules of Origin.
• Potential changes to “Made in Europe” procurement rules.
• Future incentives aimed at increasing consumer uptake of electric vehicles.

For MOT garages and independent workshops, the outcome could influence everything from the speed of EV adoption to future servicing demand, technician training requirements and the composition of the UK’s vehicle parc for many years to come.

As the transition towards zero-emission transport continues, the challenge for policymakers will be balancing environmental targets with the economic realities facing manufacturers, suppliers and the wider automotive aftermarket.