An important Conservative climate policy entered law this week. The newly enshrined Zero Emission Vehicle (ZEV) mandate, which requires car manufacturers to sell a certain percentage of electric vehicles each year, shows that the government continues to have the ambition to be a world leader in the manufacturing and rollout of electric vehicles. And crucially, their commitment to making the switch to electric cheaper for drivers. With the ZEV mandate now in place, the car industry has a clear long-term direction. We should build on this achievement with two further changes that will make the transition fairer and more convenient for motorists.
The ZEV mandate will unlock more options for drivers in the electric car market, expanding choice over make, model and price point. As the supply of cars on the market increases, costs will come down, addressing one of the major reasons why some people hesitate to get an EV. Car firms will also have an incentive to produce cheaper models and to offer discounts to hit their targets. The second hand market, where the overwhelming majority of Brits buy their car, will also grow as the number of vehicles in circulation increases and company fleet vehicles get sold on. Increasing the choice of EVs for drivers will be vital to the transition, ensuring people can get the car that’s right for them.
The ZEV mandate also supports the British automotive sector and our economy. There has been a lot of investment in the UK EV industry already, with over £6bn committed by BMW, Ford, Tata, and most recently Nissan to boost homegrown electric car production. It was welcome that the Chancellor announced an additional £2bn of government funding in the Autumn Statement to help the UK attract more EV manufacturing.
A predictable timetable for going electric is an important boost to car manufacturers. It helps companies to scale up their supply chains, from sourcing the components, to building the factories, to training the mechanics, to meet the growing consumer demand. Last year, 16.6% of all car sales in the UK were electric. In fact, the UK now has the biggest market share of electric vehicles of any major European country. Given 80% of our car industry production is exported, the ZEV mandate will also position the UK to become a leading exporter of EVs, helping us to meet demand from countries which are also setting ambitious climate goals.
The mandate establishes a clear roadmap by requiring car companies to sell an increasing number of ZEVs as a percentage of their total sales. It starts with a target of 22% ZEV sales in 2024, rising to 100% in 2035 in line with the government’s new petrol and diesel car phase out date. Car firms have the option to buy credits from other companies if they don’t meet their target. A market mechanism such as this, as opposed to a large taxpayer grant scheme, is a pragmatic, conservative approach to decarbonise our largest emitting sector.
As Conservatives, we should be proud of our record to date on electric cars. But while the ZEV mandate will be revolutionary in accelerating the affordable decarbonisation of the transport sector, more needs to be done to increase the number of charge points and make charging costs fairer.
Firstly, the ‘pavement tax’ should be addressed. At the moment, EV owners pay only 5% VAT when charging their car at home, but households without a driveway that rely on public charge points, pay the 20% VAT rate for commercial energy. These vehicle owners currently pay up to £550 a year more to charge their cars because of the higher rate of VAT for on-street chargers. This is unfair for those households who don’t have off-street parking, often those on lower incomes. The rates should be equalised at 5%.
Secondly, planning red tape on electric car chargers should be cut. It was welcome to see the Chancellor announce a consultation in the Autumn Statement to introduce more permitted development rights for EV charge points, reducing the need for companies to go through the planning system at greater cost. These new rights must be swiftly implemented to ensure the supply of chargers matches growing demand from drivers. There could also be standard guidance published for local authorities who are tendering for charge points from private companies. This should help standardise the process for contract tendering across the country, which would save councils and businesses money, while speeding up deployment of charging points.
With EV sales growing, investment flowing into new EV and battery factories, and the ZEV mandate now in law, the electric vehicle transition is powering ahead. The government should build on this momentum and unlock these new opportunities that support drivers to switch to electric and expand the rollout of charging infrastructure.
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