UK should relax EV targets to support auto sector says report
More investment in car production would help boost domestic battery manufacturing
The UK should relax its targets for the phaseout of polluting cars in order to better support the domestic automotive and battery industries, according to a report on how to attract investment in gigafactories.
The UK’s zero-emission vehicle (ZEV) mandate requires 80 per cent of new cars sold in 2030 to be non-polluting electric vehicles, rising to 100 per cent by 2035.
That should be relaxed to 50-60 per cent in 2030, with penalties for non-compliance by carmakers also reduced, to encourage investment and reduce the risk of production moving offshore, according to the Policy Commission on Gigafactories, a report on how to boost the UK’s battery supply chain.
“There is growing consensus in industry that there’s a need for a course redirection here. It’s not scrap everything, but recalibrate,” former Labour defence secretary Lord John Hutton, who launched the commission last year, told the FT.
Such changes would not “detract from the overall direction of travel”, he said, adding that “regulatory interventions have to be evidence based, not ideologically based”.
The government last year watered down the ZEV mandate legislation by lowering the fines paid by carmakers for missing sales targets. It also said in December it would begin a review of the targets this year in response to pressure from industry.
The gigafactory commission has spent months probing what is holding back the UK’s battery manufacturing industry. While independent of government, the Department for Business and Trade participated as an observer in commission meetings.
The long document, which will be published on Wednesday, makes a raft of recommendations and warns that the UK must move strategically to develop a domestic battery supply chain or risk a “sharp erosion of its automotive base”.
“This is technology fundamental to the future of UK manufacturing,” said Hutton. “A business-as-usual approach isn’t really going to cut it . . . We have to revitalise our approach.”
The UK does not have any large-scale independent battery manufacturers, following the dramatic collapse of Britishvolt in 2023. Policymakers and analysts have stressed the need for a homegrown battery champion.
AESC, which is owned by China’s Envision and supplies Nissan’s UK car plant, recently started production at its new gigafactory in Sunderland. Meanwhile Tata, the Indian owner of Jaguar Land Rover, is developing a battery factory in the UK with AESC’s involvement.
Think-tank IPPR warned on Friday that 90,000 UK jobs in the automotive and battery sectors would be at risk if the country’s China-dominated supply chain were materially disrupted. China has shown a willingness to weaponise its dominance over minerals supply chains in recent months by cutting off supplies of key materials, including rare earth elements.
Hutton’s report says that, in order to ensure there is sufficient demand for a new gigafactory, the government should work on attracting a major global company to make EVs in the UK, with a cabinet minister given responsibility for the task.
The government is trying to convince new entrants from China, and Hutton said his commission was “open to the idea that the potential [carmaker] in the UK might be Chinese”, given their leadership in EV technology.
But manufacturers have pointed to high domestic energy costs as a barrier to producing the EVs in the UK.
Carmakers have also argued that the current ZEV targets are out of step with consumer demand and that penalties for non-compliance deter investment.
Despite a sharp rise in sales, EVs represented 23 per cent of the new car market in 2025, falling below the government’s goal of 28 per cent.
The commission’s report also stressed the importance of attracting a producer of cathode active materials (CAM) to the UK — a critical part of the battery supply chain, produced from mined material such as nickel.
China controls more than 80 per cent of the CAM market, having rapidly built out manufacturing capacity, according to S&P Global Mobility. In 2024, miner Eramet said it would halt plans to develop a battery recycling plant in France because of the lack of battery factories and cathode production in Europe.
“Our commitment to transition to zero emission vehicles by 2035 is giving industry the certainty it needs,” said a government spokesperson, adding that it had committed £4bn to the battery sector via its industrial strategy.