Manufacturers react to meet ZEV targets

The ZEV Mandate is casting a long shadow over the fleet sector, with some manufacturers taking drastic action to meet the sales targets.

With 22% of new car registrations and 10% of new van registrations required to be zero emission on average this year, the likes of Stellantis have started to restrict supplies of petrol and diesel cars to force up their averages in the face of limited demand for full electric.

However, their decisions sit against a backdrop of a government position that no manufacturer will be fined for missing the ZEV Mandate target this year. And that position remains unchanged since the change in Government, according to sources at the Department for Transport.

With a number of workarounds allowed, such as deferring compliance and buying credits, most manufacturers can afford to miss their individual targets without fear of reprisal.

Nevertheless, the regulation is resulting in distinct behaviours, including manufacturers encouraging fleets that are placing large van orders to take 10% as full electric in return for better discounts.

Speaking on the latest Fleet News Quarterly Market Insight, Auto Trader director of automotive finance Rachael Jones said: “The pressure just keeps ramping up. Even 22% this year has been tough, and we likely see some more action in the final month to get there.”

The 28% target next year will be “very hard” for some brands, she added.

“OEMs are going to be looking at all the sales channels to work out their best route to market in an efficient, affordable way,” said Jones. “Fleet and leasing will be a huge focus - if you look at the SMMT stats, 75% of EV sales have been through fleet and leasing channels.

“The level of discount available from OEMs is going to be a big topic of conversation.”

With electric vehicles across the market accounting for 18% of car registrations and 5% of van sales, price has been a deterrent for many, particularly in the retail market. However, Jones points to a raft of new entrants from China which could changing the landscape.

“There are more affordable cars going to be launched in the next year, so that helps with the volume,” she said. “You're opening up the addressable market to more consumers. They're not just going to be totally priced out of market.”

Jones also highlighted the falling price of raw materials, in particular lithium, which is reducing the cost of batteries.

“We've seen it reduce in the last 12 months, and that should continue,” she said. “So you’d hope that would pass through to the price of the product as well.”