Why Every New Car Buyer Could Pay More as Manufacturers Chase a £12,000 EV Fine

• Carmakers face a fine of up to £12,000 for every new car they sell that falls short of the government’s electric vehicle sales targets.
• The industry spent an estimated £5 billion discounting electric cars in 2025 to hit those targets, with the average EV discount reaching £11,000.
• The SMMT’s own chief says 2027 will bring a compliance crunch, meaning today’s generous EV discounts may not survive much longer.

The Hidden Tax Behind Every Cheap Electric Car Deal

Every new car buyer walking into a UK showroom this autumn is standing in the middle of a pricing war that has nothing to do with them directly, yet shapes every number on the windscreen. The Zero Emission Vehicle Mandate requires manufacturers to sell a rising share of electric cars each year, climbing from 33 percent of sales in 2026 to 38 percent in 2027. Miss the target and a manufacturer pays a penalty of £12,000 for every non-compliant car sold, a figure the government cut down from an original £15,000 after sustained industry pressure.

Carmakers have responded by discounting electric cars hard enough to hit the quota rather than pay the fine. SMMT chief executive Mike Hawes has put the average discount on an EV sold in Britain last year at £11,000, and has been blunt about the arithmetic behind it: with a £12,000 payment for non-compliance, the logic of discounting almost that much to shift the car instead is obvious. The SMMT estimates the industry spent roughly £5 billion on these discounts in 2025 alone.

Who Is Actually Paying for the Discount

Those discounts are not simply generosity. Industry figures argue the cost is being absorbed somewhere else in the business, and some say it cannot continue. A senior Stellantis UK executive has said it is not currently possible to make a profit building and selling electric cars in Britain under the current pricing environment. Campaign group Transport and Environment disputes the idea that EVs are uniquely subsidised, pointing out that manufacturers spent £7.6 billion discounting petrol, diesel and hybrid cars over the twelve months to July 2026, more than they spent discounting EVs. Both figures can be true at once: carmakers are discounting almost everything to keep volume moving, and the EV mandate adds a second, specific pressure on top.

September’s registration figures show how far that pressure has pushed the market. Battery electric registrations hit a record 99,199 units for the month, up 36.3 percent year on year and giving electric cars a 28.3 percent share, close to the mandated target. Plug-in hybrids rose 55.7 percent to 59,563 units. Petrol sales fell 2.5 percent, and conventional hybrids dropped 4.2 percent. Fleet and business buyers, who respond fastest to pricing incentives, accounted for 57.5 percent of the month’s total.

Chinese Brands Are Quietly Doing the Mandate’s Heavy Lifting

A significant part of that electric growth is coming from brands that barely existed in UK showrooms three years ago. Chinese-owned manufacturers, led by MG, BYD, Jaecoo and Omoda, took close to 15 percent of the UK new car market in the first half of 2026 by one trade measure, and nearly 20 percent by another that counts a longer run of months. BYD alone registered almost 38,000 cars in the first half of the year and was named Manufacturer of the Year at the 2026 AM Awards. Jaecoo posted the single largest market share gain of any brand, and its Jaecoo 7 was the best-selling new car in Britain in September with 10,814 registrations, ahead of the Tesla Model 3 and the Ford Puma.

Autoexpress has reported that the ZEV mandate’s targets are, in effect, helping fix the UK market in favour of Chinese brands, because their electric models arrive at lower list prices and give legacy manufacturers a cheaper route to blending their own sales figures toward compliance. For buyers, that competition has been good news so far. More brands chasing the same quota means more choice and sharper pricing on electric models across the board, whatever badge is on the bonnet.

Why the Discounts You See Today May Not Last Into 2027

The target step from 33 percent in 2026 to 38 percent in 2027 is the detail that should worry anyone planning to buy later rather than now. Hawes has already warned that 2027 promises a compliance crunch, and the SMMT’s own forecasts suggest this year’s electric car and van market will fall short of the mandated share despite the discounting spree. Manufacturers do have flexibility built into the system. They can bank surplus electric sales from a strong year and draw on them later, or buy tradeable credits from a rival that has overshot its own target, which softens the cliff edge for some brands more than others.

None of that flexibility is guaranteed to keep discounts at today’s level. If a tightening quota becomes harder to hit through discounting alone, manufacturers have three levers left: discount electric cars even more steeply and quietly recover the cost elsewhere, restrict supply of popular petrol and diesel models to keep the sales mix in their favour, or accept the fine and build it into list prices generally. Industry body figures and T&E both point to the same underlying risk, that the cost of compliance, however it is met, tends to land on buyers in the end rather than on manufacturer margins.

The government is separately consulting on whether to loosen the mandate’s future targets, a move manufacturers are pushing for and campaigners are resisting. A minister has already said there are no plans to bring that review forward from its scheduled 2027 date, which means the current rules, and the pricing pressure they create, are set to run at least into next year regardless of how the debate ends.

What This Means If You’re Buying This Year

If you’re in the market for an electric car now, the mandate’s penalty structure is currently working in your favour. Dealers and manufacturers have a direct financial incentive to move EV stock before the end of the year, and that incentive is unlikely to be stronger than it is right now with the 2027 target increase approaching. Compare discounts across brands rather than assuming your preferred manufacturer is offering the sharpest deal, since compliance pressure varies by how close each brand already sits to its own quota. If you’re weighing a petrol or diesel model instead, ask the dealer directly whether list price or discount depends on a bundled EV sale elsewhere in the showroom, since some manufacturer finance offers are structured precisely to shift the sales mix toward compliance.

Salary sacrifice EV schemes remain a separate route worth checking, since the benefit-in-kind rate on electric company cars is still just 4 percent for 2026/27, rising only gradually to 5 percent the following year. That gap against a petrol company car taxed at up to 37 percent is large enough that it can outweigh short-term uncertainty over manufacturer pricing.

It is also worth remembering that compliance is judged across a manufacturer’s full UK sales mix, not car by car, so a brand can sell you a petrol model today without breaching the mandate as long as its electric sales elsewhere keep the average on target. That is one reason discounts can vary so sharply between showrooms selling almost identical electric cars, and why shopping around before signing anything is worth more now than it typically has been.

Sources:

• Call for urgent ZEV mandate review amid heavy EV discounting
• ZEV mandate: carmakers losing twice as much money on ICE cars
• UK EV targets help Chinese car brands, which may mean better deals for buyers
• Fleet registrations pass one million as September market grows 12.1%
• What is the ZEV mandate and what does it mean for you?