This post was originally published on Autocar
Changes to system are unlikely due to the wider can of worms it could open for the government, says firm
MG doesn’t expect major changes to be made to the zero-emission vehicle (ZEV) mandate, because this could increase pressure on the UK government to reverse other financial policies, such as farmers’ inheritance tax.
Commercial director Guy Pigounakis said the ZEV mandate, a fast-track review of which was confirmed Tuesday by the government, had fundamentally “changed the way cars are designed, engineered, priced and distributed” and “will continue to do so in its current guise”.
However, he believes the scope of the review will ultimately be limited, due to the can of worms it could open for the government.
He said it’s likely to extend only to a “recalibrating” of the individual targets each year by lowering the thresholds while also reducing the fines for non-compliance, which currently stand at £15,000 per car.
Even if they appear small, he said, these changes will still make a “huge difference” to some car makers, some of which “are planning to sell less cars next year”.
“When have you ever heard that before?” said Pigounakis, explaining that selling fewer of the right type of cars would be more profitable for makers.
Rather than a result of pressure from car makers, Pigounakis believes the review is related more to UK job losses and factory closures, as is happening at Ford and Stellantis.
“The last thing you want to do is start losing two or three or four massive manufacturing plants in the UK,” said Pigounakis, particularly when “the government’s whole economic policy is based on reindustrialisation”.
MG is over-performing against its current target of 22% of sales of electric cars. As such, it stands to benefit from the wider ZEV mandate scheme by selling credits to other car makers to help them become compliant.
Pigounakis said it would be “easy business” and that the going rate would “be a fraction” of the £15,000 fine that a car maker would pay per car without a credit – but “I think it is wrong, actually”.
He said: “If you look at some manufacturers, especially ones that only build electric cars, they make a huge amount of money from selling tax credits, because every car they sell generates a saleable tax credit. People like Tesla, for instance. If you look at their accounts, they make almost [as] much money selling tax credits [as selling cars].”
Pigounakis said there’s an inherent unfairness in the ZEV mandate scheme in that it doesn’t recognise and reward car makers for lowering fleet CO2 emissions, instead only mandating the sale of a set proportion of EVs.
“I have a huge amount of sympathy with some manufacturers who have done the right thing over years and years, building good, clean, efficient engines, and it’s worth nothing now in the UK.
“People like Toyota and Mazda build really good, clean engines. In Europe [where there is no EV mandate, rather a CO2 reduction goal], they still contribute. They’re in a really hard place.”
Pigounakis said the ZEV mandate is a “peculiarly UK” piece of legislation that’s “massively affecting a very significant number of manufacturers with stark extremes” in performance that’s rated in a crude and arbitrary way.
He confirmed that MG wasn’t part of the recent talks between car makers and the government.
He said: “Most of the push was to get relaxation of the rules, whereas we’re quite comfortable with them staying as they are.
“Plus, we have taken a very conscious decision to not engage at a local level [with] anything that could be related to financial benefits or penalties applied to selling electric cars.”
However, he added that “I’d probably be sitting there sort of agreeing with them”, in relation to car makers pushing for the scheme to be overhauled, even though it favours MG in its present guise.
While there is some CO2-related trading within the ZEV mandate scheme, this is based on a manufacturer’s 2021 performance and makes no allowance for any improvements made since.
Car makers that are close to compliance will continue to try and hit the 22% by any means necessary.
Pigounakis said there had been a “manipulation” of registrations of EVs across sales channels from car makers due to “desperation” to be compliant with the ZEV mandate.
Pure retail sales of EVs are down and ‘true fleet’ sales are only marginally up, despite total EV registrations having increased 14% in the year-to-date. That’s because car makers have instead forced EVs into other sectors and pressurised dealers to promote their sale.
According to Pigounakis, tactics here include restricting supply of petrol models to dealers unless EV targets are hit, tying dealer bonuses to EV sales and widespread self-registration of EVs.
Motability has also seen exponential growth for EV sales in 2024, but this is tailing off, said Pigounakis, as customer “rejections have gone through the roof”, most probably as a result of being sold a powertrain that isn’t right for them.
Residual values are also being harmed by the scheme.
More broadly, Pigounakis said he never expected incentives for EVs to return, firstly because the government has been clear on there being a financial black hole to fill and secondly because they were removed following “a massive backlash in the public about the government giving taxpayers money for people that could afford an expensive new car – and I kind of get that”.
The government’s recent budget did, however, include huge car tax hikes for petrol cars in their first year of registration, starting in April 2025.
Pigounakis said he was about to place an order with the MG factory for “thousands more cars than we normally do” for February and March, because the last time VED was put up like this, “we had a bumper March” as people looked to beat the tax hike.
The sales wouldn’t be new ones but rather ones pulled forward from subsequent months, Pigounakis cautioned.