'Desperate moves': how the car industry hit ZEV targets

“Retailer margins have been put under pressure as retailers sought to hit BEV-mix targets,” CEO Robert Forrester said.

Low-margin sales channels that got little love from the car makers in 2022 and 2023, when supply of new cars was tight, suddenly became incredibly popular.

Sales to disability charity Motability shot up 31% to a 315,102 in the year to the end of September, accounting for almost a fifth of the UK’s new car sales for the year. “Motability has exploded,” Pigounakis said.

The key to success in Motability is to discount until your model is cheap enough to be covered by all or most of the customer's weekly disability payment.

“There's no particular brand loyalty,“ Pigounakis said. “It’s about getting the lowest advance payments to make our cars as attractive as possible to sell lots of electric cars.”

Motability said it had seen a 300% Increase in EV applications in the first half of the year compared with the same period in 2023, which grew its EV fleet size by 50% to 52,000 – although it still had a fleet of more than 750,000 ICE cars at the end of June.

However, the overall fall in cars' residual values, including EVs', pushed the charity to a loss in the first half. “One thing that will change next year is that Motability will back off the electric opportunity,” Pigounakis predicted.

Also rising in 2024 were sales to daily rental companies, up 12% to 191,263, and sales of demonstrators to dealers, up 15% to 94,682 by the end of September, according to industry figures seen by Autocar.

Demonstrator sales accounted for almost 6% of the market in the first month, driven partly by car companies trying to get the latest EVs in front of reluctant buyers.

Not all the push has been for EVs, though. Sales in general have been hit by the cost of living crisis, as higher interest rates drove up mortgage rates, hitting those coming out of fixed-rate deals.

The former optimism that car buyers would be tempted into more expensive EVs by the overall lower cost of ownership has dimmed as the price of charging has risen while petrol costs have gone the other way.

Stellantis played a slightly different game by holding back on ICE car discounts with the express purpose of reducing their appeal versus EVs, thereby increasing EV share while still making money.

“We lost three points of market share but we protected the profitability and we will be compliant,” its European boss, Jean-Philippe Imparato, said in October. “You have to be compliant; if you're not compliant, you're dead.”

The worst-hit Stellantis brand was Vauxhall, which saw sales fall 20% through October, equating to more than 15,000 cars, according to SMMT figures. Particularly affected were lower-cost ICE models, including the Corsa and Mokka.

Stellantis channelled its anger over the ZEV mandate into threats to close UK plants, finally announcing in November that it would shut its van factory in Luton. 

Some commentators took issue with Stellantis blaming the ZEV mandate for a business decision that arguably would have happened anyway.

“It was weaponised lobbying,” former Aston Martin boss Andy Palmer told The Times newspaper. “Luton has been on death row for 25 years.”

However, Stellantis has always been clear that it protects profits above all else, meaning that if the costs of doing business rise (for example, discounting EVs), then its reaction will be to slash costs until the underlying profit is exposed again. 

When the profits were good, Luton’s higher production costs compared with other plants in Europe were tolerated – but not when profitability fell.

“When you're fighting for survival, everything is on the table and nothing should be excluded,” Stellantis CEO Carlos Tavares said in October, ahead of the Luton announcement.

His brutal focus on costs exposed other areas of the business, however, and ultimately resulted in his resignation on 1 December.

Car makers could be prudent in 2024 but still get hit by discounting from other brands. Tavares warned of competitors making “desperate moves” as they struggled to comply.

"They may be willing to give the cars away, and that is going to have an impact on all the other competitors," he said. In other words, this tactic destroys the pricing power of those brands on track to hit the targets.

However, Stellantis wasn’t immune, as the discounts available on the electric Jeep show.

The discounting is now winding down. As the November dust settles, it’s becoming clearer that the EV leaders – including Tesla, Volvo, BMW, Mercedes-Benz and MG – have generated enough surplus credits to be able sell to the stragglers such as Ford, the Volkswagen Group, Toyota and Suzuki. 

Meanwhile, others, such as Stellantis, are on track to hit the targets, according to market analyst New Automotive. 

Flexibilities in the ZEV mandate scheme – for example, selling more hybrid cars to drive down your average CO2 emissions – mean the true EV share target is around 18%, New Automotive has calculated. 

As of the end of October, that was achieved. “The market is now comfortably above the level required to comply with legal targets,” CEO Ben Nelmes said.

What Car? recorded a 7.5% drop in EV discounts in November. “This trend suggests that some companies may feel less pressure to meet ZEV mandate conditions,” said Pat Hoy, head of its Target Price mystery-shopping team.

That’s being reflected in lower sales of EVs from some of the more comfortable brands. For example, BMW’s EV sales were down almost 25% in October, while MG’s dropped 28% and Volvo’s fell 8%.

Cheaper electric models due in 2025 should make life easier for car makers, despite the higher 28% EV target.