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Net zero rules are set to trigger another year of steep price cuts to electric cars, one of Britain’s biggest dealership chains has predicted.
Vertu Motors, the fourth-largest motor retailer, said it expected further discounting in 2025 as manufacturers scramble to meet strict government sales targets.
Under the so-called zero emission vehicle mandate, companies must make 28pc of the cars they sell electric this year or risk massive fines. The figure is up from 22pc in 2024.
But with EVs still significantly more expensive than petrol cars on average, manufacturers have been resorting to price cuts to ensure they shift enough vehicles.
The discounting frenzy has been a boon for consumers, resulting in discounts of more than £10,000 per car in many cases, according to data from Auto Trader.
However, Vertu has warned it is also putting car dealers under “increasing pressure” as their margins from sales are being severely squeezed.
The company added: “In 2025, the new car market is likely to face further pressure as the ZEV mandate targets rise from 22pc to 28pc.
“In the absence of significant Government incentives to stimulate sales, the increased target is likely to lead to continued pressure on new car volumes and margins as the market is increasingly distorted in favour of BEVs.”
It came as the company also warned that the Government’s National Insurance tax raid has increased its wage bill by £10m.
As a result, it said it had been forced to make savings by axing jobs, adopting new technology and closing its branches on Sundays.
Dealerships typically buy in bulk from car makers and then resell them at higher prices that include an agreed profit margin.
But Vertu said the ZEV mandate was wreaking havoc as weak demand for EVs forced manufacturers to cut prices, resulting in smaller profits for dealers.
At the same time, fewer cars are being sold overall as manufacturers hold back supplies of petrol and diesel vehicles. They are also reducing the bonuses they pay to dealers for hitting sales targets.
Robert Forrester, Vertu’s chief executive, said: “The Government’s ZEV Mandate is causing severe disruption to the UK new car market, and the consumer environment is subdued.”
The company’s warning comes as the ZEV mandate target of 22pc increased to 28pc for 2025. It will continue to rise gradually until it reaches 80pc of sales by 2030.
Car makers including Stellantis and Ford have claimed the targets are too far ahead of “natural” consumer demand and called on the Government to relax the rules.
Last year, the Society of Motor Manufacturers and Traders (SMMT) said car makers had spent £4.5bn on discounting to help meet the requirements.