Electric car discounts are unsustainable, warns industry group

Industry discounts for electric vehicles are “unsustainable”, a major automotive group has warned, as the number of new cars registered in the UK surpassed two million last year for the first time since the pandemic.

Nearly 500,000 of new cars sold were electric, according to figures from the Society of Motor Builders and Traders (SMMT).

SMMT chief executive Mike Hawes welcomed what he called a “reasonably strong result against a backdrop of challenging 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.

Reductions worth thousands of dollars per vehicle were “unsustainable,” he said.

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

However, it is still well below the 2.3 million sold in 2019.

Electric cars accounted for 473,340 new registrations last year, giving them a market share of 23.4%.

This is a significant increase from 2024, but still below the government’s overall target of 28%, under the so-called Zero Emission Vehicle Mandate (ZEV mandate).

The mandate states that automakers that fail to sell enough electric cars, as a percentage of their overall sales, face hefty fines.

However, the rules include concessions that can allow them to avoid penalties, for example by reducing emissions from other vehicles in their fleet, or by purchasing excess “emissions credits” from manufacturers who exceed their own targets.

These “flexibilities” were extended in April, following intense lobbying from some manufacturers, while fines for non-compliance were reduced.

But Hawes warned that despite this, carmakers needed to offer deep discounts in order to sell enough electric models. The SMMT estimates that these rebates were worth more than £5 billion last year, or around £11,000 for every electric vehicle sold.

Hawes said this was unsustainable, especially as manufacturers were expected to hit a more ambitious target of 33% this year. He called on the government to propose a planned review of the ZEV mandate, which is expected to take place in 2027.

“This increases the number of battery electric vehicles (BEVs) sold,” he said. “The question is: at what cost?

Such a review, he suggested, should examine factors that have changed significantly since the targets were first planned, including a marked increase in energy prices and higher raw material costs, which have made life more difficult for automakers.

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

“Make no mistake, the industry is not changing course,” he insisted.

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

Eurig Druce, managing director of the Stellantis Group in the UK, which owns brands including Vauxhall, Peugeot and Citroën, called for the review of the ZEV mandate to be brought forward to early this year, as “the UK is increasingly out of step with the position in Europe and the rest of the world”.

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

Some commentators, however, are more positive about the ZEV mandate.

Colin Walker of the Energy and Climate Intelligence Unit, an environmental research group, welcomed the latest recording figures.

“2025 was another exceptional year for electric vehicle sales, with almost one in four cars sold in 2025 being an electric vehicle,” he said.

“This policy, in turn, will boost the second-hand market in the UK, where the majority of us buy our cars, alleviating drivers’ concerns about the cost of living.”

But Ginny Buckley, chief executive of electric vehicle consumer advice site Electrifying.com, warned that many drivers still do not feel confident about the prospect of driving an electric vehicle.

“Increasing electric vehicle sales from one in four new cars to one in three by the end of the year will not be achieved through momentum alone. Along with the growing choice of electric vehicles, buyers need trust, clear messaging and political stability.

The government has introduced a number of measures to support the adoption of electric vehicles over the past year.

They understand the £2bn 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 he also announced plans to introduce a “per kilometer” tax on electric vehicles – a measure intended to offset some of the reduction in fuel tax revenue caused by the transition to electric vehicles.

According to the independent Office for Budget Responsibility, these incentives could generate around 320,000 additional electric vehicle sales over a five-year period. But he says the new tax is likely to counteract that by reducing sales by around 440,000, which would result in an overall reduction of 120,000.

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

“To make technological change like this, you need consistent and compelling messaging and support.

“Even announcing a tax specifically on electric vehicles will send a very mixed message to consumers.”

Transport Minister Keir Mather insisted the government’s investment was “driving the uptake of electric vehicles, with sales up almost 24% over the year, meaning one in four new cars sold are electric and there are almost half a million new electric vehicles on UK roads since 2024.”

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