In a significant policy shift, the UK, currently Europe's largest electric vehicle (EV) market, has relaxed its carbon emission regulations, following the European Union's decision to extend the compliance timeline for the automotive industry by three years.
The move comes in response not only to broader changes in the market environment but also to mounting pressure from the automotive sector, which has voiced concerns over the feasibility of the original targets.
Supply chain insiders noted that while Europe has been relatively aggressive in setting emission reduction goals, the industry's pace of adaption and local consumer demand have consistently fallen short of expectations.
Mutiple hurdles for transitiobn to electrification
These challenges have been further intensified by the rapid ascent of Chinese manufacturing, which has placed significant strain on Europe's renewable energy sector. Meanwhile, the automotive industry's transition to electrification has stumbled over multiple hurdles, including soaring electricity costs driven by the ongoing Russia-Ukraine conflict and slower-than-expected progress in power grid integration and EV charging infrastructure deployment.
Under the revised policy, the UK will postpone the enforcement of its "zero-emission mandate" from 2030 to 2035. During the extended transition period, new hybrid vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) will remain on sale, allowing models such as the Toyota Prius and Nissan's e-Power EVs to be sold beyond the original deadline. However, petrol- and diesel-only passenger vehicles are still slated for phase-out by 2030, as initially planned, according to foreign media reports.
To ease the transition, the UK government has pledged GBP 2.3 billion (approximately US$2.95 billion) in funding to support the production of low-emission vehicles and provide workforce training within the industry.
UK Prime Minister Keir Starmer has defended the government's decision to ease carbon dioxide emission regulations, pointing to the collapse of global free trade as a key factor. Starmer stressed that the UK must move swiftly to reshape both the nation and its economy according to its own transformation agenda.
Policy shift needed to stabilize economy
Industry insiders noted that the relaxation and delay of carbon reduction policies across Europe had been widely anticipated within the supply chain. The primary aim, they explained, is to stabilize the economy and protect jobs amid ongoing industrial challenges.
While emission standards have been loosened and deadlines pushed back, insiders expect these policies to remain flexible and open to further adjustments as market conditions continue to evolve.
Meanwhile, the UK automotive industry is bracing for the impact of a newly imposed 25% tariff by the US on imported vehicles. In 2024 alone, approximately 100,000 new cars were exported from the UK to the US, with Jaguar Land Rover (JLR) particularly exposed, as the American market accounts for 25% of its total sales. In response to the tariff hike, JLR has announced a temporary suspension of its vehicle exports to the US market.
It's worth noting that Germany's subsidy cuts led to a decline in domestic demand for EVs in 2024, enabling the UK to surpass Germany as the largest EV market in Europe.
Article edited by Joseph Chen
