UK ZEV Mandate Check-In: EVs at 25% Against a 33% Target — Who Pays the Fine?

The gap

Year-to-date through June 2026, battery electric vehicles account for 25.0% of UK new car registrations. That is a record. It is also eight percentage points short of the ZEV Mandate's 2026 requirement of 33%.

To close that gap outright, BEVs would need to exceed 40% of registrations for the remainder of the year. The market has never sustained anything close to that. Three out of four UK new-car buyers are still choosing a non-BEV powertrain.

So: who pays?

Almost nobody. And understanding why is essential to understanding what the ZEV Mandate actually is.

The headline penalty

Miss your ZEV obligation and the compliance payment is £12,000 per vehicle short of target — reduced from £15,000 in the April 2025 revisions announced by the government.

Two things about that number are widely misunderstood.

First, it is technically not a fine. Paying it is a legitimate route to compliance under the legislation. It is priced at roughly what a manufacturer "saves" by building an ICE car instead of a ZEV, plus a penalty component for excess CO2. Which means a sufficiently wealthy manufacturer could, in principle, buy its way out of the transition — an uncomfortable feature of the design.

Second, and more importantly: hardly anyone reaches that point, because of the flexibilities.

The five ways to comply without selling EVs

1. CO2 credit transfer (the big one). Manufacturers that cut the average CO2 of their non-ZEV fleet below a 2021 baseline can convert that overperformance into ZEV credits. This is how a hybrid-heavy manufacturer complies without selling many EVs. Originally capped and set to expire after 2026, the April 2025 revisions extended it through 2029. The cap for cars in 2026 is 25% of the annual ZEV requirement.

2. Borrowing. Draw against future-year allowances if a key EV is coming. It carries a 3.5% compound interest rate, and the borrowing limit steps down: 75% of the annual requirement in 2024, 50% in 2025, 25% in 2026. Extended through 2029 at 20%/15%/10%. All borrowing must be repaid by 2030.

3. Banking. Carry forward surplus credits from an over-performing year.

4. Pooling. Groups under common ownership share credits across brands — invaluable for Stellantis, which spans Vauxhall to Maserati.

5. Trading. Buy credits from manufacturers with a surplus. In practice this means buying from Tesla, BYD and Polestar.

What the numbers show about how this really works

The Department for Transport's first compliance report, covering 2024, is genuinely instructive. The headline target was 22%. Actual BEV registrations came in below that — but effective compliance reached 24.3%, comfortably above target.

Nobody was fined. Not one manufacturer.

Around 39,000 credits (2.1% of the market) were traded in 2024, at roughly £4,000 each. That is the number that matters. Buying a credit at £4,000 to avoid a £12,000 payment is not a difficult decision. The trading market prices compliance at about a third of the statutory penalty.

In 2025, the target was 28% and actual BEV share landed around 23.4–23.9%. Another miss on the raw number. Another year in which the flexibilities absorbed it.

So is the mandate working?

It depends entirely on what you think it is for.

If the mandate is a mechanism to force BEV sales: it is not working. Raw BEV share has missed the target in 2024 and 2025 and is on course to miss it in 2026.

If the mandate is a mechanism to make non-compliance expensive and thereby drive investment: it is working extremely well. Manufacturers have deployed more than £12 billion in discounts since 2024 to move EVs. In 2025, the average discount on a BEV was around £11,000 — versus a £12,000 compliance payment. Manufacturers are, quite rationally, discounting to just below the cost of the penalty.

That equivalence is the most revealing statistic in the whole scheme. The mandate has not created demand. It has created a £12,000-per-car price ceiling on non-compliance, and manufacturers have priced their discounts to sit fractionally underneath it.

The reform fight

The SMMT wants the mandate reviewed now. Its Business Leaders Barometer found 100% of surveyed executives believe the UK is behind the trajectory needed for 2030, with 73.8% saying significantly behind. Stellantis UK's group MD has argued publicly that being forced to increase supply into weak demand makes vehicles loss-making and calls the investment case into question.

The government's position, restated repeatedly, is that the trajectory does not change: 80% by 2030, 100% by 2035, no exceptions. Ministers have pointed to more than £2.3 billion of support for industry and consumers, and note that fine revenue would be recycled back into the sector.

There is a statutory review point in 2026, and all flexibilities, banking and borrowing were originally scheduled to end at that point. That review is now the single most consequential event in UK automotive policy.

What it means for you as a buyer

Counterintuitively, the mandate is your friend at the moment.

Every manufacturer short of its target has a powerful financial incentive to sell you an EV at a discount — because the alternative costs them £12,000 or £4,000-ish in credits. That is why EV discounting has been so aggressive, why the salary-sacrifice market is so strong, and why the Electric Car Grant landed on top of already-heavy manufacturer support.

If the 2026 review softens the mandate, that discounting pressure eases. The best time to buy a discounted EV in Britain may well be before the review concludes, not after.

• 2026 ZEV target: 33% BEV. YTD actual: 25.0%
• Compliance payment: £12,000 per car (reduced from £15,000 in April 2025)
• Nobody was fined in 2024 — flexibilities lifted effective compliance to 24.3% against a 22% target
• Credits traded at roughly £4,000 each — a third of the penalty
• Average BEV discount in 2025 was ~£11,000, sitting just below the £12,000 penalty

Key takeaways

• 2026 ZEV target: 33% BEV. YTD actual: 25.0%
• Compliance payment: £12,000 per car (reduced from £15,000 in April 2025)
• Nobody was fined in 2024 — flexibilities lifted effective compliance to 24.3% against a 22% target
• Credits traded at roughly £4,000 each — a third of the penalty
• Average BEV discount in 2025 was ~£11,000, sitting just below the £12,000 penalty