Hope For The Combustion Engine?

After 2 months of consultation and discussion with various stakeholders in the automotive industry the government announced changes to the strict ZEV Mandate at the beginning of the week. But what does it all mean for you and the types of cars you will be able to buy over the coming years.

Last year just 5.6% of vehicles that we funded were fully electric, so the latest changes to the combustion engine ban policies mean a lot for our customers and the types of cars you will be buying not just throughout 2025 but over the next few years and beyond too.

With so many changes coming into force regarding vehicle tax changes since the beginning of the month and the uncertainty of the current trade tariffs going on around the world, we thought it would be useful to put together a roundup of what the latest updates mean for you, our customers.

Hybrids

Part of the original ZEV Mandate was that whilst purely combustion engine vehicle sales would be banned from 2030 onwards, hybrid powered vehicles were given a further 5 years to 2035. When Labour were elected they had originally revised the plans so that all vehicles that were not fully electric would be banned from 2030 onwards, yet they have now returned to the original schedule.

With many manufacturers now including hybrid assistance to the majority of their model line ups, the government have also stated that the hybrid vehicles able to be sold for that additional 5 years are ‘full-hybrids’ rather than ‘mild-hybrids’. A mild hybrid may use electric assistance for some of its running and electrical systems, but a full hybrid is able to be either plugged in or recharged on the move to allow running on electric power only, even if only for a few miles or so.

Exemptions

A lot of smaller manufacturers have been left in the dark about what the ZEV Mandate means for them. Especially brands that rely on other manufacturers for their donor models that simply do not have the budgets or the manpower to create their own vehicles from scratch, or potentially the knowledge to start modifying batteries and electrical motors.

The government have clarified that small manufacturers such as Lotus, McLaren, Caterham and even Bentley and Aston Martin will be exempt from the hybrid requirements in place from 2030 to 2035. Despite the majority of them pushing ahead with hybrid variants, or in the case of Lotus a fully EV model range, it provides them with much more scope to continue with models that they depend on for the majority of their sales.

Even more good news for smaller manufacturers is that the government will agree with each brand a ‘nominal’ reduction of CO₂ emissions across their ranges from 2030. With the majority of car makers already exploring hybrid assistance or reducing emissions to meet more strict regulations, this is seen as a huge victory for those previously worried about their future plans.

Manufacturer Rules

Towards the end of 2024 there was a lot of discussion around how many manufacturers were struggling to meet the 20% electric vehicle sales target for that year. With this year’s target increasing by 40% to 28% overall, the pressure is on to meet an even stricter EV share. The good news is however that the £15,000 fine per vehicle the target was missed by has now been reduced to £12,000. Whilst still a potentially hefty fine for those that don’t meet the target, at least it is less of an expense.

Another lifeline for manufacturers struggling to meet the ZEV Mandate targets has also been introduced with the ability to transfer ‘credits’ over a longer period. If a manufacturer was looking like the target would not be met they were able to bank credits for future years, as long as they could prove that emissions across their entire range were being reduced. This system was due to expire next year yet it has now been extended to 2029, a year before the combustion engine ban comes into force. By that point the target is two-thirds of vehicle sales to be fully electric.

This also means that the ability to borrow said credits from one year to another to allow for an average between the two to meet the target has also been extended to 2029. This is particularly advantageous for car makers who have put back their original EV plans to a later date, giving them time to catch back up.

Commercial vehicles

Whilst the changes have extended the life of the hybrid powerplant for another 5 years, commercial vehicle manufacturers have had an even better result. The purely combustion engine ban in 2030 will not apply to vans therefore petrol, diesel, hybrid and fully electric vans will continue to be able to be sold right up until 2035.

What’s more, the reduction in fines imposed on not meeting the ZEV Mandate targets has also been reduced for commercial vehicles. With the fines for cars being reduced by £3,000, vans have also seen the same reduction, with the fine for not meeting the target now down from £18,000 per van to £15,000. Though with the ability to sell combustion engine vans for a further 5 years, buyers are no longer forced to switch to a hybrid or EV as early, surely meaning that the targets will be more difficult to meet for commercial vehicle sales.

This has however helped manufacturers that sell both cars and vans. The government have now said that brands that sell both, namely Ford, Nissan and the Stellantis Group, will be able to transfer excess credits between either format. Therefore if a brand is overperforming in one sector yet struggling in another, they can transfer credits to subsidise the other one and vice versa.

Still Not Enough?

With EV’s now being subject to road tax for the first time, one of the major incentives for electric vehicles has been taken away. The government has blamed a fall in revenue from motorists making the switch for the reason for the taxation, yet EV owners are understandably not happy about it. Electric car buyers have previously been rewarded with government grants, free charging at some public charge points, exemption from road tax and now none of those incentives are provided.

There had been a lot of pressure on the government from EV manufacturers and the Society of Motor Manufacturers and Traders (SMMT) to introduce incentives on brand new electric vehicles as well as cutting the VAT on public charging from its current 20% to 5%. This has not been mentioned in the updates however. The government feel that the ‘lower running costs’ and ‘smoother, quieter driving experience’ are enough of an incentive for people to make the switch to electric motoring.

Record EV sales figures for March may have been a step in the right direction for electric vehicle manufacturers, however much of the uplift will have been due to the fact that March was the last chance to avoid the introduction of EV vehicle taxation. Those who made the switch early by buying an EV last month not only avoided having to pay Vehicle Excise Duty for another year but also dodged the additional Expensive Car Supplement for the following 5 years after that. A considerable saving over the first few years of ownership indeed.

Why Choose Oracle?

Whether you have found the car you wish to buy or not, speak to your dedicated Account Manager today by calling us on 0800 012 6666 or simply complete our online form. If you have found the right car they will be able to discuss your options and provide you with a custom finance package just for you and your circumstances. If you are yet to find the right car, they will be able to discuss your options or budget with you to ensure the make and model you are looking at are right for you and your price range. We can also use our knowledge of the car market and our connections to help source you just the car you are looking for with the right specification for what you need.