How ready is the UK for the ZEV mandate?
The Zero-Emission Vehicle (ZEV) mandate is due to come into force in 2024, requiring manufacturers to ramp up the number of electric vehicles (EVs) they produce. But the road to net-zero transport does not hinge on vehicles alone, so just how ready is the UK for this transition?
In 2022, the UK Government unveiled plans to implement the ZEV mandate. Starting on January 1, 2024, manufacturers will need to progressively increase the percentage of ZEVs in their annual new car and van sales across the UK until they reach 100% for those vehicles by 2035.
The ZEV mandate has been at the center of a political back-and-forth between Ministers in recent weeks. Sky reported that some prominent MPs, including Trade Secretary Kemi Badenoch, are pushing back on the mandate. Some manufacturers and media publications are also opposing the proposals of the ZEV mandate, due to the burden it places on automakers.
But the UK’s EV transition will not solely depend on manufacturing requirements. From charging infrastructure and industry investments to policy clarity and public awareness, it is evident that the success of the EV transition does not solely hinge on vehicles alone. A joined-up approach across manufacturing, finance, infrastructure, and the public is required to deliver this ambition.
With the UK now nearing its implementation date for the ZEV mandate, a critical question arises: How ready is the nation for this transformative shift?
Policy framework and security
Last month, a survey published by the Energy and Climate Intelligence Unit (ECIU) revealed that the public is confused about the UK Government’s plans to phase out petrol cars.
Among the responses of more than 1,500 participants, 45% of the public held the belief that a complete prohibition on petrol and diesel-fuelled cars would be implemented by 2030.
Alongside the public bewilderment and political turmoil, the lack of official government clarification has sparked uncertainty surrounding the ZEV mandate rollout.
Speaking exclusively to edie, the Green Finance Institute’s (GFI) programme director, leading the coalition for the decarbonisation of transport, Lauren Pamma, explains that there is a growing need for education and dispelling of myths to ensure consumers are prepared to purchase vehicles.
Pamma says: “If the 2030 mandate is pushed back, it would be an absolute disaster. Policy stability and certainty are critical for investors and the investors to be comfortable to move into a sector.
“In the strongest possible terms, we would encourage the date to be stuck to. That date is critical in itself, but the implementation of the ZEV mandate in terms of the pathway leading up to 2030 is also important, so we really want to see that come out as soon as possible.”
Pamma’s point is based on the notion that surface transport is the UK’s highest-emitting sector, accounting for 23% of the UK’s emissions in 2022 and needs to be reduced by 58% by the 2030s under Government scenarios.
Nevertheless, the Climate Change Committee (CCC) casts a doubtful light on the feasibility of achieving these reductions given the current policies in place.
One of the key focuses of the GFI’s work to date is how financing can help unlock the UK’s EV transition.
The Government has pledged to invest more than £5bn across infrastructure, manufacturing and research & development (R&D) to accelerate the electrification of the sector and support the rollout of the ZEV mandate.
The funding encompasses six initiatives including Faraday Battery Challenge (£318m), Advanced Propulsion Centre (£1bn), Driving the Electric Revolution (£80m), Office for Zero Emission Vehicles (£2.5bn), Automotive Transformation Fund (£1bn), and Connected Automated Vehicle Technology (£440m).
While several funding channels have been established, industry experts have expressed concern that the sector might deplete these funding sources while attempting to keep up with the anticipated growth demanded by the ZEV mandate.
Pamma explains: “When the companies are reaching the ends of the great supportive grant landscape, they’re having to cross the valley of death, as we call it, to access the finance they need to scale up their growth.
“However, this is where we are seeing the amount of capital these companies require does not match the risk profiles of the companies at that point.
“We are working on the concept of the Battery Investment Facility (BIF) to try and blend public capital with private capital, and rather than using that money as grants, we plan to use it to provide a first-loss mechanism.”
Concerns over a “valley of debt” are echoed by other green groups. The Green Alliance recently highlighted that the automotive industry’s nature presents a challenge: future revenue is uncertain. The think tank explained that offtake agreements are typically finalised during the later stages of significant capital projects, and original equipment manufacturers (OEMs) usually delay signing offtake agreements until production begins, which can lead to a project quickly becoming a game of chicken and egg.
“We do need to see a step up in private investment, but I think that it will all come given that this is the direction of travel already seeing significant increases in interest from finance institutions,” Pamma adds.
Analysis has also highlighted that the ZEV mandate and the UK’s wider EV transition will also need to iron out some supply chain challenges that could impact the nation’s international competitiveness in the sector.
Last month, the ECIU cautioned that approximately 80% of cars produced in the UK are exported, with the primary destinations being the EU, China, and the US.
The ECIU has estimated that by 2030 the UK might experience a reduction of £10.9bn in car exports to the EU, a loss of £1.45bn in exports to China, and more than £900m in exports to the US, which could lead to a potential decline of up to 59% in car export earnings, driven by the increased domestic EV production in these markets.
Regarding the effect of the ZEV mandate on the dynamics of the supply chain, Pamma says: “If there aren’t similar ZEV mandates in other parts of the world, there’s a risk that OEMs are going to continue to sell their diesel and petrol vehicles for as long as they can and in jurisdictions where they can.
“That might risk the number of cars that are potentially sold into the UK, or they might just decide that the UK isn’t probably as valuable a market as other areas are. We really need a global agreement on how we phase out internal combustion engines (ICE) vehicles for the mandate to be successful.”
Last month, New Automotive published research that raised concerns about eligible car manufacturers facing a potential £660m revenue risk due to their inability to meet regulatory requirements under the ZEV mandate.
Amidst the challenges of insufficient investment and unclear policies, the ZEV mandate pathway encounters added complexities stemming from skill and technological factors.
A 2022 report from the Social Market Foundation highlighted that despite a current surplus of technicians, the industry is projected to face a shortage of 25,100 TechSafe-certified technicians specialised in EVs by 2030.
“The companies could go further by not only producing more affordable cars that can help more consumers access those EVs, but by doing more to faster train mechanics and engage more with the dealer network to actually help them have the tools to be able to sell the EVs to consumers,” Pamma adds.
Chargepoints and costs
The success of the EV transition arguably hinges on matching demand for zero-emission transport with reliable charging options.
According to the latest figures from the Society of Motor Manufacturers and Traders (SMMT), in July, over a third of UK car registrations were electric vehicles (EVs), with battery electric cars being registered at a rate of one per minute.
As the overall EV market gained momentum, the used EV sector also surged by 82% compared to the previous year, enhancing EV affordability and alleviating cost-related obstacles.
However, while the EV market expands and EVs become more cost-effective, concerns arise about the infrastructure required to support the growth, particularly in terms of chargepoint stations.
In a recent report by Recharge UK, it was noted that there are more than 40,000 public EV chargepoints in the UK, serving approximately 2% of vehicles on the road. However, with EVs projected to increase to 80% by 2030, the number of EVs on the road is expected to reach 11 million, prompting the need to expedite the deployment of charging stations.
To expedite charging infrastructure financing, the GFI has revealed intentions to introduce Utilisation Linked Finance, enabling a business or local authority to secure a loan for installing charging infrastructure and only repaying the financing based on usage, in an effort to reduce the risk during the initial deployment phase.
Pamma says: “Now when chargepoints operators are looking at the markets for investment, they are seeing much more interest from investors than they were one or two years ago. We’re already seeing the investment starting to ramp up significantly.”
The journey to a ZEV-driven future requires collaboration between automakers, chargepoint operators, policymakers, and consumers. The UK can achieve this with clear policies, investment, and commitment.
So, is the UK ready for the ZEV mandate? Perhaps not right now, but it is attainable.
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