Industry group warns electric car discounts are unsustainable

A major motoring group has warned that industry rebates for electric vehicles are “unsustainable” as the number of new cars registered in Britain exceeded two million last year for the first time since the pandemic.

According to data from the Society of Motor Manufacturers and Traders (SMMT), about 500,000 of the new cars sold were electric.

SMMT chief executive, Mike Hawes, welcomed what he called a “reasonably solid result amid difficult economic and geopolitical headwinds”.

But electric car sales are still not growing fast enough to meet official targets, he said, warning of a growing gap between consumer demand and government ambitions.

The discounts of thousands per vehicle were “unsustainable,”, he said.

new cars were registered in 2025,

Overall, 2,020,373 new cars were registered in 2025, the third consecutive year of growth and the highest since the pandemic.

However, this is still significantly less than the 2.3 million sold in 2019.

There were 473,340 new registrations of electric cars last year, taking their market share to 23.4%.

This was a significant increase over 2024 but still short of the government’s main target of 28%, known as the zero emission vehicle mandate (ZEV mandate).

The mandate states that carmakers who fail to sell enough electric cars as a percentage of their total sales could face hefty fines.

However, there are some concessions in the rules that may enable them to avoid penalties, for example, by reducing emissions from other vehicles in their fleet or by purchasing surplus ’emission credits’ from manufacturers that exceed their targets.

These ‘flexibilities’ were extended in April after heavy lobbying by some manufacturers, while penalties for failing to comply were reduced.

But Howes warned that even then, carmakers are having to offer deep discounts to sell enough electric models. SMMT estimates these rebates were worth more than £5 billion last year, or about £11,000 for each electric vehicle sold.

Hawes asserted that this approach is unsustainable, particularly given the anticipated 33% target for manufacturers this year. They urged the government to initiate a planned review of the ZEV mandate for 2027.

“This is increasing the sales of battery electric vehicles (BEVs),” he said. “The question is, at what cost?”

He suggested that such a review should look at factors that have changed significantly since Target’s first plan, including significant increases in energy prices and higher raw material costs, which have made life more difficult for carmakers.

However, he stopped short of explicitly calling for further weakening of the rules.

“Don’t get me wrong – the industry is not changing its ways,” he stressed.

“He needs to sell these vehicles because he has invested so heavily in them. But you need to make sure that the market more closely reflects the real level of demand.”

Eurig Drus, group managing director of Stellantis in the UK, which owns brands such as Vauxhall, Peugeot and Citroën, called for a review of the ZEV mandate to be brought forward earlier this year as “the UK continues to lose ground in Europe and the rest of the world”.

Speaking on the BBC’s Today programme, he said speeding up the review would give manufacturers “certainty” when making investment decisions and “help consumers make the right choice for the cars they want to buy for their future”.

However, some commentators are more positive about the ZEV mandate.

Colin Walker of the Environmental Research Group, Energy and Climate Intelligence Unit, welcomed the latest registration figures.

“2025 has been another bumper year for EV sales, with nearly one in four cars sold in 2025 being an EV,” he said.

“This policy will in turn boost the UK secondhand market, where most of us buy our cars, reducing drivers’ worries about making a living.”

But Ginny Buckley, chief executive of EV consumer advice site Electrifying.com, warned that many drivers still don’t feel confident about the prospect of driving an EV.

“Moving EV sales from one in four new cars to one in three by the end of the year won’t happen on pace alone. Along with the growing choice of EVs, buyers need confidence, clear messaging and policy stability.”

The government has taken several measures to promote electric vehicles in the last year.

They include the2BN Electric Car Grant Scheme, which provides up to £3,750 towards the cost of purchasing an electric vehicle, as well as significant funding for charging infrastructure.

However, in the autumn budget, it also announced plans for imposing a “per mile” tax on electric vehicles—a measure designed to compensate for some of the losses in fuel duty revenues due to the transition to electric vehicles.

According to the independent Office for Budget Responsibility, the incentive could generate about 320,000 additional EV sales over a five-year period. But it said the new tax was likely to cut sales by around 440,000 – bringing the total down by 120,000.

“That’s one of the challenges we see,” Hawes said.

“For this kind of technological change, you need consistent, coherent and compelling messaging and support.

“Even announcing a tax specifically on EVs would send very contradictory messages to consumers.”

Transport Minister Keir Mather stressed that government investment is “boosting EVs,” with sales increasing by almost 24% year over year, meaning one in four new cars sold is electric, and there will be almost half a million new EVs on UK roads by 2024.