UK’s ZEV Mandate: CEO Warns of Industry-Wide Challenges
Toyota Europe’s President and CEO, Yoshihiro Nakata, has voiced significant concerns about the UK’s ZEV Mandate (Zero-Emission Vehicle) mandate.
Speaking at the Goodwood Festival of Speed, Mr Nakata emphasised the urgent need for collaborative efforts between automakers and policymakers to effectively address the ambitious ZEV targets, which are set to significantly reshape the automotive industry.
The ZEV Mandate Explained
The UK’s ZEV mandate came into force on January 3, 2024. It requires car manufacturers to ensure that electric vehicles comprise at least 22% of their total sales volume. This percentage is set to increase annually, and those failing to meet the targets will face hefty fines of £15,000 per non-compliant vehicle.
Under the ZEV Mandate, 80% of new cars and 70% of new vans sold in Great Britain must have zero emissions by 2030. This percentage will increase to 100% by 2035.
Toyota’s Current EV Position
Toyota currently offers only one pure electric vehicle model, the bZ4x. However, Mr Nakata expressed confidence in the company’s commitment to developing a diverse range of EVs, aiming to provide customers with various choices in the future.
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Hybrid Focus and CO2 Reduction
For now, Toyota continues to concentrate on selling pure and plug-in hybrid vehicles. Nakata believes this approach effectively contributes to the universal goal of reducing CO2 emissions as quickly as possible.
Customer Demand and Alternative Fuels
Mr. Nakata said real customer demand is very important to Toyota’s plans. He suggested that people currently prefer hybrid cars more than electric vehicles.
This perspective is reinforced by Toyota’s recent collaboration with Mazda and Subaru to optimise combustion engines with more efficient electric motors and batteries and explore alternative fuels. This shows that customer preferences are at the heart of Toyota’s innovation.
Meeting ZEV Mandate Targets
Despite concerns, Toyota GB’s Managing Director and President, Scott Thompson, has confirmed that the company is on track to meet ZEV mandate targets this year.
While details of next year’s strategy remain undisclosed, Thompson expressed confidence in Toyota’s multi-path philosophy for the future, which will lead to a more sustainable and environmentally friendly automotive industry.
Global Competition and Tariffs
Mr Nakata addressed the EU’s decision to increase import tariffs on Chinese-built EVs, acknowledging the potential short-term benefits for Toyota. However, he anticipates that Chinese companies will likely establish European factories in response, intensifying competition in the market.
Toyota’s Core Values and UK Commitment
Toyota remains committed to its long-held values of providing mobility for all and taking a visionary approach. Nakata reaffirmed the company’s dedication to continuing production of Corolla hybrids at its Burnaston plant near Derby, emphasising Toyota’s ongoing contribution to UK society.
Understanding the ZEV Mandate’s Broader Impact
The Road to Net Zero
The ZEV mandate is crucial to the UK’s commitment to achieving net-zero carbon emissions by 2050. The government has focused heavily on road transport, opting for a more drastic approach of banning non-zero-emission car sales rather than relying solely on incentives for electric vehicles.
This policy shift could have significant implications for the UK automotive industry. It could lead to a rapid increase in the production and sale of electric vehicles and a shift in the competitive landscape.
Compliance Strategies for Manufacturers
Car manufacturers have several options for meeting ZEV mandate requirements:
- Pooling with connected entities
- Banking overperformance for future years
- Borrowing against future performance (with limitations)
- Trading between ZEV and CO2 requirements
Challenges and Opportunities
The ZEV mandate presents significant challenges for manufacturers, particularly those with limited electric vehicle offerings. However, it also creates opportunities for innovation and collaboration within the industry.
As the automotive landscape evolves, companies like Toyota must navigate these complex regulations while meeting customer demands and maintaining their competitive edge.
ZEV FAQ’s
What are some examples of compliance mechanisms included in the ZEV mandate for manufacturers?
The ZEV rules allow companies to meet targets for selling zero-emission vehicles. Companies can trade, save, or borrow ZEV allowances.
If they sell more than needed, they can trade extra allowances. They can buy, borrow, or use saved allowances to sell more. They can also use CO2 emissions allowances or pay to meet their requirements.
How does the ZEV mandate accommodate special-purpose vehicles and small-volume manufacturers?
The ZEV mandate helps special purpose vehicles (SPVs) and small volume manufacturers (SVMs) with exceptions and special rules. SPVs are not directly regulated, but their zero-emission models can earn credits.
Manufacturers who sell less than 1,000 non-ZEVs do not have to follow the CO2 rules. Also, for the ZEV rule, smaller sellers don’t need special permission to sell under 1,000 vehicles. Sellers with sales between 999 and 2,500 vehicles have a simple process to follow.
When is the mid-point review of the ZEV mandate and CO2 regulation scheduled?
The Government will publish the mid-point review of the ZEV mandate and CO2 regulation in early 2027. This timing was chosen based on respondent feedback and the expiration of certain flexibilities at the end of 2026.