‘The government is at risk of killing off British car manufacturing’

Nearly two years into government, Labour still lacks a credible automotive strategy. Worse, it risks undermining the one policy currently giving manufacturers and investors a clear sense of direction.

Reports that Business and Trade Secretary, Peter Kyle, is allegedly pushing for the dilution of the UK’s zero emission vehicle (ZEV) mandate amount to a striking admission of failure. 

The UK’s flagship Zero Emission Vehicle mandate was never intended to carry the full weight of industrial policy. It is a foundation upon which a strong industrial strategy, designed to drive investment, build domestic supply chains and develop the necessary skills for the sector, is built. Weakening or removing the ZEV mandate now would destroy that foundation. Creating uncertainty and destroying the investment case for EV and battery manufacturing in the UK.

Crucially, it would expose the central failure of the Department for Business and Trade: not that the mandate went too far, but that ministers never produced a credible plan to keep British automotive manufacturing competitive in an electric future.

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And Britain’s competitors are not hesitating. China is successfully executing its New Energy Vehicle Industrial Development Plan cementing its place as a leading global EV exporter. The EU, meanwhile, is pairing regulation with its Automotive Action Plan and Industrial Accelerator Act in order to ensure that the EU automotive industry remains competitive through the transition. Key policies included in EU requirements require on-shoring of manufacturing in the EU and tariffs to prevent over subsidised Chinese EVs undercutting EU manufacturing. In both cases, governments are matching ambition with strong policy to support their domestic auto manufacturing. 

By contrast, the UK is not committed to either. Faced with mounting pressure from carmakers, the Secretary of State for Business and Trade would rather loosen the rules than confront the sector’s deeper structural challenges: high energy costs, global overproduction capacity among some manufacturers like Stellantis and fast moving competition from China. China is now not only highly competitive on EVs but is also increasingly gaining market share on internal combustion engine models. Jaecoo, a Chinese carmaker, now sells more plug in hybrids in the UK than any other brand after only entering the market in 2024.

This means that slowing down the transition and sticking with petrol and diesel is not going to help the UK’s auto industry either. The consequences of weakening the ZEV mandate are not abstract. Investment decisions are being made now about where the next generation of electric vehicles, batteries and supply chains will be built. If the UK cannot offer policy certainty alongside competitive conditions, that investment, and the jobs and growth that come with it, will go elsewhere.

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This is the real test of Labour’s economic credibility. Managing the transition to electric vehicles is not optional, it is already underway globally. The question is whether the UK shapes that transition or loses its automotive sector all together.

If the Government proceeds with changes, it will send a damaging signal across the economy: when the pressure rises, Britain steps back while its competitors press ahead. The question is whether Labour wants to be known as the government who led the UK auto industry to global EV leadership, or that set it on the path to destruction. 

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