A survey of U.K. automotive sector leaders revealed a warning that unless mandated zero emission targets are not reformed, the industry is facing disaster.
The Society of Motor Manufacturers and Traders’ latest State of the Automotive Nation report issued June 30, featuring its second UK Automotive Business Leaders Barometer survey, also sees industry leaders calling for the U.K. government to secure equal trading standards with the European Union and cut energy and business costs.
Its report welcomes recent progress, including £4 billion ($5.3 billion) of the government’s DRIVE35 funding; action on industrial electricity costs through the British Industrial Competitiveness Scheme; trade deals with the U.S., India and the six Gulf Cooperation Council countries; electric vehicle grants; and regulation to support self-driving vehicles.
However, the SMMT pointed out that the most immediate concern is the government’s ZEV Mandate for the 50 senior automotive leaders who represent £94 billion in turnover, 113,000 employees and 98.4% of U.K. vehicle production.
The regulation is running ahead of natural market demand and forcing companies to subsidize the market at unsustainable levels, said the SMMT in a June 30 statement accompanying the State of the Auto Nation report.
Every business leader responding to the survey said the U.K. is behind the trajectory needed to meet the 2030 target, with almost three-quarters saying it is significantly behind.
Pressure on automakers will increase sharply from January 2027, when annual EV sales targets rise to 38% for passenger cars and 34% for light commercial vehicles, before climbing again to 52% and 46%, respectively, in 2028.
Current market shares stand at 23.9% for cars and 9.5% for LCVs with automakers having already spent more than £12 billion on discounts to stimulate demand, money that could have supported new models, jobs and investment, said the SMMT.
A second potential threat comes in the shape of Europe’s “Made in EU” business strategy which risks the U.K. being shut out of its biggest export market.
These proposals put forward by the European Commission would make U.K. automotive products uncompetitive in the majority of the European market unless the EU recognizes the U.K. as “assembled in the EU,” warned the SMMT.
Four-in-five U.K. automotive business leaders say their operations would be hit if the proposals go ahead unchanged, and both the U.K. and EU stand to lose out given the interconnected nature of the sector.
In addition, from January 2027, tougher rules of origin under the EU-U.K. Trade and Cooperation Agreement will trigger a 10% tariff on some 70% of EVs and plug-in hybrid models traded across the Channel.
Without a joint solution, the sector faces a tariff bill of around £1.4 billion in 2027 alone, putting some £16.4 billion in U.K.-EU trade in EVs and PHEVs at risk by making many of these crucial models less competitive and less affordable, added the SMMT.
While BICS help with energy costs is welcome, seven-in-10 auto leaders say cutting energy costs would have the most positive impact on their business.
Even with BICS, energy costs in the U.K. remain some 60% above the EU average and the SMMT is calling for further action to make the U.K. a more competitive place to manufacture.
“We need open trade with Europe, competitive conditions at home, and a realistic route to grow zero emission vehicle uptake,” said SMMT chief executive Mike Hawes in a statement. “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,” he added.
