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Industry incentives for electric vehicles are “unsustainable,” a leading automotive organization has cautioned, as new car registrations in the UK surpassed two million last year for the first time since the pandemic.
Figures from the Society of Motor Manufacturers and Traders (SMMT) indicate that nearly 500,000 of the new vehicles sold were electric.
Mike Hawes, Chief Executive of the SMMT, acknowledged what he termed a “reasonably solid result amid tough economic and geopolitical headwinds”.
However, he cautioned that electric car sales were not increasing rapidly enough to meet official objectives, pointing to a widening gap between consumer demand and government ambitions.
According to Hawes, the substantial discounts, amounting to thousands per vehicle, are “unsustainable.”
A total of 2,020,373 new cars were registered in 2025, marking the third consecutive year of growth and the highest total since the onset of the pandemic.
Nevertheless, this figure remains considerably below the 2.3 million units sold in 2019.
Electric vehicles accounted for 473,340 new registrations last year, securing a market share of 23.4%.
While this represents a significant increase from 2024, it still falls short of the government’s headline target of 28% under the Zero Emission Vehicles Mandate (ZEV Mandate).
The ZEV Mandate stipulates that automakers failing to meet electric vehicle sales targets, as a percentage of their overall sales, may face substantial fines.
However, the regulations include concessions that allow manufacturers to avoid penalties, such as reducing emissions from other vehicles in their fleets or purchasing surplus ’emissions credits’ from manufacturers exceeding their targets.
These ‘flexibilities’ were expanded in April, following extensive lobbying from some manufacturers, and the fines for non-compliance were reduced.
Hawes noted that even with these provisions, carmakers are compelled to offer significant discounts to boost electric model sales. The SMMT estimates these discounts totaled over £5 billion last year, or approximately £11,000 per electric vehicle sold.
Hawes emphasized that this level of discounting is unsustainable, particularly as manufacturers face a more stringent target of 33% this year. He urged the government to expedite the planned review of the ZEV Mandate, scheduled for 2027.
“It is increasing the number of battery electric vehicles (BEVs) being sold,” he stated. “The question is, at what cost?”
He suggested that the review should consider factors that have changed significantly since the targets were initially set, including a notable increase in energy prices and higher raw material costs, which have presented challenges for car manufacturers.
However, he stopped short of explicitly advocating for further relaxation of the regulations.
“Don’t get me wrong – the industry is not diverting course,” he asserted.
“It needs to sell these vehicles because it has invested so heavily in them. But you need to make sure the market reflects more closely the actual level of demand.”
Eurig Druce, Group Managing Director for Stellantis in the UK, encompassing brands like Vauxhall, Peugeot, and Citroen, advocated for an early review of the ZEV Mandate, stating that “the UK is increasingly out of step with the position in Europe and the rest of the world.”
Speaking on the BBC’s Today programme, he argued that accelerating the review would provide manufacturers with “certainty” in making investment decisions and assist “consumers to make the right choice for the cars that they want to buy for their future.”
However, some commentators hold a more favorable view of the ZEV Mandate.
Colin Walker of the Energy and Climate Intelligence Unit, an environmental research group, welcomed the latest registration figures.
“2025 has been another bumper year for EV sales, with nearly one in four cars sold in 2025 being an EV,” he said.
“This policy in turn will boost the UK’s second-hand market where the majority of us buy our cars, easing cost of living concerns for drivers.”
Ginny Buckley, Chief Executive of the EV consumer advice site Electrifying.com, cautioned that many drivers still lack confidence in the prospect of driving an EV.
“Moving EV sales from one in four new cars to one in three by the end of the year won’t happen on momentum alone. Alongside the growing choice of EVs, buyers need confidence, clear messaging and policy stability.”
Over the past year, the government has introduced several measures to support the adoption of electric vehicles.
These include the £2bn Electric Car Grant Scheme, offering up to £3,750 towards the purchase of an electric vehicle, along with significant investment in charging infrastructure.
However, the autumn Budget also unveiled plans to introduce a “per mile” tax on electric vehicles – a measure intended to offset the reduction in fuel duty revenues resulting from the shift to electric vehicles.
According to the independent Office for Budget Responsibility, the incentives could generate approximately 320,000 additional EV sales over a five-year period. However, it suggests that the new tax is likely to counteract this effect by reducing sales by about 440,000, resulting in an overall decrease of 120,000.
“This is one of the challenges we see,” said Hawes.
“To have a technological shift like this, you need consistent, coherent and compelling messaging and support.
“Even the announcement of a tax specifically on EVs will send a very conflicting message to consumers.”
Transport Minister Keir Mather asserted that government investment was “driving EV uptake, with sales up nearly 24% on the year, meaning one in four new cars sold are electric and there are nearly half a million new EVs on Britain’s roads since 2024”.
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