ZEV mandate: what it is and how it will impact UK drivers

The ZEV mandate sits within the wider Climate Change Act and is loosely based on California’s approach to EV adoption. A key difference is that the Californian system has been tweaked multiple times in response to industry and market developments, and it allows for PHEVs, backed by incentives.

It’s a legislation that runs far deeper than the headline of a sliding scale of EV sales that each car maker must hit each year. It’s all part of the UK’s legislated commitment to be net-zero on carbon emissions by 2050.

Working backwards from that, the proposed ban on the sale of any new vehicle that isn’t an EV was set for 2035, because the average life of a car on the road is 15 years.

For that reason, in its effort to keep the UK on track to hit its carbon-reduction targets en route to 2050, the government has focused most strongly on road transport and taken the more drastic approach of banning the sale of non-EVs, rather than simply incentivising electric cars.

It removed its incentives on the purchase of new EVs in 2021, although favourable BIK tax rates on EVs remain for company car users.

Changes to the ZEV mandate in 2025

In April 2025, the UK government announced major changes to the ZEV mandate, relaxing incoming rules in an attempt to reassure the industry. 

The changes mean manufacturers can continue to sell full hybrid (HEV) and plug-in hybrid (PHEV) cars until 2035. 

According to the government, this will “ease the transition and give the industry more time to prepare”. That said, there’s still no word on the rules for mild hybrids (MHEVs) and range-extender electric vehicles (REXs or REEVs).

Low-volume manufacturers - those that produce fewer than 2500 cars per year - also won't be required to hit an 80% EV sales mix by 2030. This includes British brands Aston Martin, Bentley, Rolls-Royce, Morgan and McLaren. 

The main sales mix targets of the ZEV mandate have remained unchanged: car makers still need to hit an EV sales mix of 28% this year and 80% by 2030.

However, the associated fines for missing the target have reduced from £15,000 to £12,000 per car. 

Pure ICE vans can also remain on sale until 2035, alongside hybrid and plug-in hybrid vans. 

The government has also modified the Non-Zero Emission Car CO2 Trading Scheme (CCTS) for additional support.

This is where a car maker can offset sales of non-EV models by exceeding CO2 reduction targets, reducing their EV sales mix target for that year. For more information on the CCTS scheme, read on. 

Annual mandate targets from 2025 to 2035

The ZEV mandate sets limits on the maximum percentage of non-EVs that each manufacturer can sell.

It dictates that 22% of sales must be EVs in 2024, 28% in 2025, 33% in 2026, 38% in 2027, 52% in 2028, 66% in 2029 and 80% in 2030. (There are similar targets for vans, starting at 10% in 2024 and reaching 70% in 2030.)

It's only indicative after that, though: 84% in 2031, 88% in 2032, 92% in 2033, 96% in 2034 and 100% in 2035.

Previous legislation dictated that car makers met a fleet average for CO2 emissions. This has now been rolled into the ZEV mandate, revoking European Union legislation on CO2.

Called the Vehicle Emissions Trading Schemes (VETS), it mandates a growing proportion of EVs each year while also ensuring that CO2 emissions from non-EVs don’t increase.

The CO2 part of VETS is based on a 2021 baseline figure for each manufacturer’s non-EV fleet average CO2 emissions.

So long as it was compliant in 2021, a manufacturer can use either its actual or target CO2 figure as its reference, whichever is higher.

And any future overperformance against this target can be transferred into a limited number of additional non-EV allowances in the first three years, potentially reducing the number of EVs that the manufacturer is required to sell in the earlier period of regulation. 

Car makers can also 'pool', ‘bank’ and ‘borrow’ their emissions, which is where it starts to get complicated.

To deal with the easy part first, ‘connected entities’ – Stellantis or the Volkswagen Group, for example – are able to pool together. Do so and manufacturers must pool on both ZEV and CO2 and take a CO2 baseline average accordingly.

Whether it’s a connected entity or on its own, a manufacturer can then bank and borrow.

Banking allows it to quite literally bank overperformance on ZEV mandate sales on a rolling three-year basis from 2024 to 2030 to allow for a hiccup in a future year.

Borrowing is the inverse: if a manufacturer knows its game-changing mass-market EV is coming next year, it won’t mind underperformance in the current year.

However, it can borrow only up to 75% of its mandated 22% EV share in 2024, 50% in 2025 and 25% in 2026. To put it another way, a car maker at a bare minimum needs 5.5% of its sales mix to be EVs this year.

Any borrowing also attracts a 3.5% compound interest rate, meaning targets will only become harder to hit in future years. Think of Ford and Toyota here. Borrowing will last for three years.

No car maker has yet gone on the record with what its actual ZEV mandate figure is after using CO2 performance to offset it down from 22%, but one car maker’s is understood to be as low as 8%. More typical numbers quoted to Autocar have been 18-20%.

Whatever figure a car maker has been given based on 2021 is locked in for three years, and the proportional gap to the mandated EV figure remains the same each year.

Adding further complexity is that car makers can trade between the ZEV mandate and the CO2 requirements and vice versa.

Overperformance on the ZEV mandate earns a manufacturer credits for CO2 compliance. This could allow it to sell a light-performance combustion car from a sub-brand, for example. It has three years to utilise these credits.

It’s less financially beneficial to trade CO2 credits in order to achieve ZEV compliance, because ZEV is seen as the dominant part of the legislation.

Imagine it as differing currency exchange rates. Still, for the first three years of this scheme, overperformance on CO2 reduction will reduce a manufacturer’s ZEV mandate target, although this is capped at 65% in 2024, 45% in 2025 and 25% in 2026.

This part of the scheme is best thought of as similar to the 2021 baseline set for CO2 being used from this year: overperformance on CO2 will help reduce a manufacturer’s ZEV target.

The headline in all of this is that even after a manufacturer has pooled, banked, borrowed and traded, for every car it sells short of its ZEV target in a given year, it will be fined £15,000 (although this technically isn’t a fine, as paying this amount is a legitimate way of complying with the legislation, however unpalatable).

This figure is based on what’s considered to be the ‘saving’ to a car maker of building an ICE car versus a ZEV, as well as a penalty for its excess CO2 emissions.

The final catch, though, is that manufacturers can buy credits from others that overperform on the ZEV mandate in order to comply. JLR has been on the record saying that it will be buying credits to comply, for example. The likes of BYD, MG and Tesla can expect to do a good trade here. The going rate for a credit is unknown, other than it won’t cost more than £14,999.99.