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THREATS by car-makers to withdraw from the UK market over stringent net-zero emission targets imposed by the government could prove a bonus for other right-hand drive markets such as Australia, says Cox Automotive.

The warning comes a week after the CEO of Stellantis, Carlos Tavares, said the targets could force carmakers such as Stellantis to scale back their presence in Britain and even force them to cease offering some models in an effort to protect margins.

Mr Tavares said the UK ZEV mandate could drive carmakers to flood the market with EVs, eroding profitability and ultimately threatening their viability.

He said Britain’s EV policy was “terrible”, warning that it could ultimately lead to carmakers facing bankruptcy.

CEO of Stellantis, Carlos Tavares

He said the UK’s quota system which forces manufacturers to meet increasing annual EV sales targets within the UK market has been set at levels “double the natural demand of the market”.

According to Mr Tavares, this could force carmakers to sell vehicles at a loss in order to avoid heavy fines, jeopardising financial stability.

“To survive, companies have to stay in the black. I will not sell cars at a loss”, he said, adding that the net zero measures could mean it scales back its presence in 

Britain and even force it to cease offering some models.

In its latest Insight Quarterly published for the UK market, Cox Automotive said the healthy start to 2024 was tempered by several caveats.

These were caused by uncertainty over what impact legislation to phase out ICE technology will have on the sector allied to future policy decisions issued by a new government in office.

Cox Automotive said that while it was still too early to call in terms of its ultimate impact this year, “the launch in January of the ZEV mandate – the UK regulation requiring manufacturers to sell an increasing percentage of zero emission vehicles each year until an eventual ban in 2035 – will play a critical role in industrial fortunes.”

Cox Automotive’s insight and strategy director, UK-based Philip Nothard, said fewer first-quarter private registrations – at 40.4 per cent, they are 8 per cent lower than the figure year-on-year – was “a bitter pill to swallow” for OEMs and dealers as cars bought by private buyers generate healthier margins.  

He said consumer doubts about the transition to electric focused on affordability and infrastructure are playing their part in lacklustre EV uptake, leaving the sector heavily reliant on fleet purchasing to drive a recovery of sales volumes.

Mr Nothard said costly ZEV “allowances” may be one way manufacturers can soften the impact of the mandate or they may simply reduce volume in the UK market in an effort to hit the 22 per cent figure.

Philip Nothard

“With the UK’s ICE ban deadline U-turn, a palpable lack of help for the sector in the most recent budget, such as the government addressing the VAT discrepancy between domestic and public charging, it may well be that an unintended consequence of the ZEV mandate could be a drop in the supply of new vehicles,” he said.

“Manufacturers looking at the UK market may change tack and opt to put their cars into less stringent markets in other parts of the world. 

“It’s still early days, but clarity on how the sector will react in the inaugural year of the mandate has yet to materialise.” 

But, while the mandate cast a warning over the industry, Cox noted that new car registrations are up 10.4 per cent year-on-year in Q1, boding well for a return to pre-pandemic normality.

It led to Cox Automotive estimating registrations at over two million cars, with the most positive forecast extending that to beyond 2.2 million.

“That rethink is contingent upon a more robust performance in the second half of the year buoyed by signs of economic stabilisation alongside the imperative for manufacturers to gain market share while meeting ZEV mandate obligations,” Mr Nothard said.

He also warned that the Q1 performance this year in the UK still lags behind the pre-pandemic average.

By Neil Dowling

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