7:32 am, July 1, 2026
The government’s electric car targets are hurting manufacturers with the industry unable to wait for ‘lengthy’ discussions over reforms, the car industry’s trade body has said.
A new report from the Society of Motor Manufacturers and Traders (SMMT) says if the current ZEV Mandate targets aren’t revised and UK-EU trade protected, the UK car industry will face a loss of investment and jobs.
The SMMT’s latest State of the Automotive Nation report, which also features the second UK Automotive Business Leaders Barometer, sets out a ‘blueprint’ for the next prime minister.
The report argues that one of the UK’s most strategically important high-value sectors can return to growth, but only if government moves quickly to remove the barriers holding it back.
The SMMT said every automotive business leader who responded to its most recent survey said the UK was behind on its to meet the 2030 target, with almost three-quarters saying it was significantly behind.
The government’s Industrial Strategy must align with its own polices to delivery growth, SMMT chief Mike Hawes said in a speech yesterday (Jun 30).
‘Let me be clear. This industry is committed to decarbonisation. EVs are the future. The issue is how we get there,’ he said.
‘We, as an industry, were spending billions creating zero emission vehicles before any targets were set. We committed billions more to make them.
‘But we are now spending billions more subsidising a market shift that isn’t shifting because natural demand is just not sufficient.’
SMMT data shows the EV market share is 23.9% so far this year, down on the mandated 33% by the end of the year, and the body pointed to independent reports that suggest natural demand is less than half that.
‘Next year the target will be 38%. In 2028 52%,’ said Hawes.
‘Vans are only at 9.5% when we have to hit 34% in ’27 and 46% in 2028.
‘No one in the industry thinks it can be done.
‘The Climate Change Committee, however, knows better than the industry. Its Seventh Carbon Budget assumes the car and van market will be 95% BEV by 2030.
‘But the Committee on Climate Change’s remit does not extend to industrial consequences. To the impact on local production, on jobs and communities. If we all have to buy EVs from abroad to hit net zero so be it. The UK will meet its Climate goals but the domestic industry will be collateral damage.
‘Governments, however, have to care about such consequences.’
He added: ‘The ZEV mandate is already costing jobs, profitability and is creating significant risk to UK investment.
‘It needs to be reviewed. Urgently.
‘Not abandoned, but amended to reflect reality.’
The SMMT also warned that tougher rules of origin due from January 2027 could trigger a 10% tariff on around 70% of battery electric and plug-in hybrid models traded between the UK and EU, costing the sector around £1.4bn in 2027 alone.
Meanwhile, proposed EU ‘Made in Europe’ rules could make UK-built automotive products uncompetitive across much of Europe unless UK vehicles are recognised as assembled in the EU for these purposes.
Hawes said: ‘The Commission’s “Made in Europe” proposals as drafted effectively shut out UK-assembled vehicles from most of the European market. And that risks becoming one of the most spectacular own goals in history.”
He added: ‘Because if Britain is written out of ‘Made in Europe’ this is not just a problem for UK producers, it is a direct threat to the European industry.’
The SMMT’s State of the Automotive Nation report did welcome recent progress, however, particularly the £4bn of Drive35 funding, EV grants, trade deals with the US, India and GCC, and action on industrial electricity costs.
However, the body said more needed to be done to cut energy and business costs, with UK energy costs still around 60% above the EU average even after support.
Hawes added: ‘UK Automotive can drive growth, innovation and net zero, but only if the right decisions are taken now.
‘The Industrial Strategy sets out a plan, but delivery is now what matters.
‘We need open trade with Europe, competitive conditions at home, and a realistic route to grow zero emission vehicle uptake.
‘Reforming the ZEV Mandate is not about weakening ambition; it is about making the transition achievable, protecting investment and ensuring the UK remains a place where automotive businesses can build, sell, export and grow.
‘The window for action is closing, which means we cannot wait for lengthy discussions.’
The SMMT said getting policy right could help the UK build 1.3m vehicles a year, support 188,000 manufacturing jobs and grow automotive trade already worth more than £110bn annually.
Hawes concluded: ‘We must align Industrial, Net Zero, Energy, Trade and fiscal strategies in the pursuit of growth.
‘We need to be ahead of the game not chasing it.’
