The Government is reviewing the Zero Emission Vehicle (ZEV) Mandate, with the consultation now open until 23 October 2026. For manufacturers, dealerships and businesses across the automotive supply chain, this could mean further changes to a sector that has already seen significant regulatory and commercial pressure.

The ZEV Mandate sets annual targets for the proportion of new cars and vans sold by manufacturers that must be zero-emission. For 2026, the target is 33% for cars and 24% for vans, increasing to 80% and 70% respectively by 2030.

The latest figures show that the market is moving in the right direction, but there is still a gap between consumer demand and the Government’s targets. Battery electric cars accounted for almost 30% of new registrations in August, while electric vans reached 16.3% of the market.

For businesses operating in the automotive sector, the important question is what the review could mean in practice.

What is being reviewed?

The current ZEV Mandate already gives manufacturers some flexibility around meeting their annual targets, including the ability to trade and bank allowances.

The Government is now considering whether the existing arrangements are working as intended, whether the current trajectory remains appropriate and whether further changes are needed as the UK moves towards its 2030 targets.

The outcome is not yet known, but the consultation allows businesses to consider how changes to the regime could affect their plans.

For manufacturers, this could have a direct impact on production decisions, model mix, investment and supply chains. For businesses further down the supply chain, the implications may be less immediate but could still be significant.

Don’t wait for the final rules

There is a natural temptation to wait until the Government has completed its review before making any changes. However, businesses should be looking at their position now.

The transition to electric vehicles is already affecting commercial arrangements across the sector. Supply and distribution agreements, procurement contracts and dealership arrangements may have been negotiated on assumptions about vehicle volumes, technology and demand which could change over the next few years.

Businesses should consider whether their existing contracts give them enough flexibility if those assumptions change.

For example, what happens if agreed volumes are no longer commercially viable? Can orders be reduced or delayed? Are pricing mechanisms flexible enough to deal with increased costs? Who bears the risk if components become obsolete or new technology needs to be introduced?

These are questions that are much easier to address when entering into or renewing an agreement than when a commercial relationship is already under pressure.

What about dealerships?

The impact of the ZEV transition is not limited to manufacturers.

Dealerships are already adapting to changing franchise models, new entrants and increased competition, while also investing in charging infrastructure, new equipment and the skills needed to service increasingly sophisticated vehicles.

This needs to be factored into decisions about acquisitions, disposals, financing and property.

A dealership which looks attractive today may have very different capital expenditure requirements over the next five years. Businesses considering an acquisition should therefore look beyond current trading performance and consider what investment may be required as vehicle technology and manufacturer requirements change.

The same applies to property. Changes to the way vehicles are sold, serviced and charged could affect the suitability of existing premises and the investment required to bring sites up to standard.

The wider supply chain

The move towards electric vehicles is also changing the automotive supply chain.

Businesses that have historically relied on components associated with internal combustion engines may need to consider how resilient their customer base will be as the market changes. At the same time, businesses supplying batteries, software, charging infrastructure and other EV-related products may be presented with significant opportunities.

For both, contracts will be important.

Long-term supply agreements should be reviewed to understand how they deal with changing volumes, pricing, technology and regulatory requirements. Businesses should also consider whether they are overly dependent on particular customers or suppliers and what happens if that relationship changes.

This is particularly important where significant investment is being made in new technology or manufacturing capability.

Heavy goods vehicles are well behind the curve being followed by cars and vans – reports indicate that less than 1% of new HGV’s are ZEV in the first quarter of 2026. Whilst the Government recognises that the phased approach is necessary where technology has not yet caught up with the need, and offers some incentives to use EGV’s, there is significant work to be done. Industry is calling for a comprehensive national infrastructure strategy, and fast tracking of planning approval for HGV depot upgrades, together with a rapid rollout of public infrastructure.

What should businesses be doing now?

Although the outcome of the Government’s review is still some way off, there are steps automotive businesses can take now.

Businesses should consider:

• reviewing key supply, distribution and procurement agreements;
• identifying contracts that rely on assumptions about vehicle volumes or technology;
• checking whether existing agreements provide sufficient flexibility if regulatory requirements change;
• reviewing planned investment in EV infrastructure and technology;
• considering the impact of changing vehicle demand on dealership and property requirements (including planning, and any HGV operator’s licences);;
• assessing supply-chain dependencies and alternative suppliers;
• factoring future regulatory and investment requirements into acquisitions and disposals; and
• considering whether responding to the Government’s consultation would be appropriate.

The automotive sector has already had to adapt to significant change and the ZEV Mandate is unlikely to be the last.

The direction of travel towards lower-emission vehicles is clear, but there remains uncertainty around how quickly the market will move and how the regulatory framework will develop.

For manufacturers, dealerships and suppliers, the priority should therefore be to make sure that contracts, investments and business plans are flexible enough to respond.

The Government’s consultation is an opportunity for the industry to have its say, but businesses do not need to wait until the review is complete before considering the potential impact on their own operations.

If you would like advice on how the ZEV Mandate review or the wider transition to electric vehicles could affect your contracts, supply chain, dealership or automotive business, we’re here to help. Get in touch with Pardeep Khela at PardeepKhela@schofieldsweeney.co.uk or Clare Benger at ClareBenger@schofieldsweeney.co.uk.