UK government unveils changes to electric vehicle rules
Prime Minister Keir Starmer has launched new reforms to bolster Britain’s automotive industry and accelerate the transition to electric vehicles (EVs).
This move reaffirms the 2030 phase-out date for new petrol and diesel car sales, while offering carmakers more flexibility to meet ambitious green targets.
The changes come in response to US President Donald Trump’s tariffs. Trump has imposed a 25 per cent tariff on foreign-made cars as part of his economic plan to “supercharge” the US economy.
Under the updated strategy, hybrid vehicles will be permitted until 2035, and small volume manufacturers will be exempt from certain regulatory targets.
The new measures form part of a £2.3bn push to support zero emission vehicle (ZEV) manufacturing and EV infrastructure, while also helping working people afford the switch.
The measures come as nearly half of all companies across the UK are scaling back hiring plans in response to an increase in employment taxes and labour costs, according to recruitment agency Reed.
Speaking on Monday, Starmer said global economic headwinds and a shifting trade landscape made it essential to go “further and faster” in reshaping the economy through his ‘plan for change’.
He positioned the automotive strategy as a key driver for growth, aiming to boost exports, secure jobs and put more money in working people’s pockets.
The government is introducing sweeping flexibilities into the ZEV mandate, giving automakers greater freedom in meeting emissions targets over the next decade.
Manufacturers can now borrow credits until 2030, and shift credits between different vehicle types.
Hybrids will continue to count toward emissions savings targets through 2029, offering the industry a smoother transition period.
Boost for British car industry
The move is aimed at providing “certainty and stability” for British car brands like Land Rover, Rolls Royce, and Vauxhall. Many of these were hit hard by Brexit uncertainty, global supply chain shocks, and, more recently, international tariffs. Recent tax hikes and regulatory changes have also hit the industry.
Transport secretary Heidi Alexander called the reforms a “decisive and ambitious” intervention to protect jobs and make the UK a global leader in EV production.
She noted that, unlike previous delays and policy U-turns, this package provides long-term direction for the sector.
In a nod to consumer affordability, the government will continue offering tax breaks and other incentives to make EV ownership more accessible.
Currently, drivers who charge at home overnight can save up to £1,100 a year compared to petrol vehicles.
Growing EV market
The measures reflect strong growth in EV demand, with UK electric vehicle sales rising more than 40 per cent in March compared to last year.
In 2024, the UK became Europe’s largest EV market, and the third largest globally, with over 382,000 EVs sold.
The UK automotive industry employs over 150,000 people and contributes £19bn to the economy. It is considered a pillar of the country’s advanced manufacturing base.
Business Secretary Jonathan Reynolds said the strategy would give the sector “the certainty that secures jobs, drives investment and ensures they thrive on the global stage.”
Meanwhile, Chancellor Rachel Reeves emphasised the economic logic behind the plan: “This is about putting more pounds in people’s pockets and building an economy that delivers for working people”, she said.
Industry challenges
The reforms come as Britain’s car sector navigates renewed global challenges, including export restrictions and retaliatory tariffs.
KPMG has warned that Trump’s US tariffs on UK exports could cause GDP growth to fall to 0.8 per cent this year and next, Sky News reported.
The company said higher tariffs on categories like cars would offset the exemption on pharmaceutical exports, leaving the effective tariffs imposed on UK exports at around 12 per cent.
Minister confirmed that the package would be kept under review as the impact of these international pressures becomes clearer.
With competition from China and the US intensifying, the UK is keen to secure a leading role in the global EV race.
More than £34bn in clean energy investments has already been announced since July, underscoring investor appetite for Britain’s green transformation.
The government’s £2.3bn injection and flexible regulation aim to position the UK as a leading contender in the global EV market, despite these challenges.
“This is about future proofing British industry”, said Keir Starmer, “and delivering change that actually works for working people.”