Tough government targets are now resulting in job losses and factory closures in car industry. Action has to be taken
Think it was tough for car makers to hit the ZEV mandate in 2024? As it stands, it’s going to get even tougher in 2025. And 2026, and 2027…
The 22% electric car sales mix requirement in 2024 becomes 28% in 2025 and increases up to 80% in 2030.
While six percentage points year-on-year might not sound a lot, in real terms it requires growth in EV sales of almost 30% in 2024.
Given the challenges that car makers have faced in trying to scrape to the target this year, including more than £2 billion of their own subsidies to try to tempt buyers in the form of big discounts, there are very few places left for them to turn.
Discounts are harming residual values of the cars themselves and car makers have essentially paid fines already through the form of these discounts. With no support from the government incoming, they’re going to have to go to a depleting well again.
More worryingly, the slowdown in EV demand is resulting in cutting workforces, as is occurring at Ford. It's also behind Stellantis's proposal to close its Luton factory and roll all its UK operations into Ellesmere Port.
Problems with the ZEV mandate are myriad, the way the growth has been drawn in a linear way among them. Since when did the adoption of a new technology follow a neat, straight line? Particularly something as dramatic as a generational shift not just in the type of product but also the infrastructure to support it.
The ZEV mandate was written with several assumptions in mind: growth would be exponential, energy would be cheap, borrowing money would be cheap, fuel prices would remain high and battery costs would come down.
None of those assumptions have come true, so no wonder it's going to be reviewed. And only fair it is, too. It could be that the industry's meeting last week with government prompted this review, but it's more likely the bad headlines the government is now facing with job losses and factory closures due to one of its own policies.
The right decision in the end, it's just a shame it took such things to happen for action to be taken.