Chinese automakers profit from the UK’s electric vehicle incentives

Chinese Automakers Poised to Benefit from UK Zero-Emission Rules

Chinese car manufacturers are set to gain from the United Kingdom’s net zero regulations, as new rules require major car companies to pay competitors if they fall short of emissions targets.

Industry analysis reveals that eight automakers, including Jaguar Land Rover and Toyota, failed to sell enough electric or low-emission vehicles last year to comply with government requirements.

Among these, Suzuki, Nissan, Mazda, and Honda lag so far behind the mandated goals that they must purchase “credits” from companies that have surpassed their quotas.

Manufacturers with a strong electric vehicle presence—such as Tesla, China’s BYD, and brands like Polestar and MG (owned by Geely and SAIC)—are in the best position to sell these credits.

Some industry experts have criticized the policy, arguing it effectively “subsidizes” Chinese automakers. Many Chinese brands import only electric vehicles to the UK, resulting in an excess of credits they can sell to others.

Understanding the Zero-Emission Vehicle Mandate

The zero-emission vehicle (ZEV) mandate, introduced by the Conservative government and updated by Labour, requires carmakers to ensure a growing percentage of their annual sales are electric. The target starts at 22% in 2024 and increases to 80% by 2030.

Manufacturers receive allowances for selling low-emission vehicles, such as hybrids, to help meet these targets. Some companies can also “borrow” credits from future years if they expect to exceed the targets later in the decade. However, there are limits to how much borrowing is allowed, so those significantly behind must buy credits or face fines of £12,000 per vehicle below the target.

Industry Shortfalls and Financial Risks

According to a report by the non-profit group Transport & Environment, nearly all carmakers missed last year’s 28% target based solely on electric vehicle sales. While some closed the gap with low-emission credits, Hyundai, Stellantis, Toyota, and JLR had to borrow against future sales. Suzuki, Nissan, Mazda, and Honda, even after maximizing borrowing, still need to acquire credits.

Together, these four Japanese brands fell short by 4,273 vehicles, putting them at risk of collective fines approaching £50 million if they cannot secure enough credits.

Credit Trading and Strategic Partnerships

Tim Dexter of Transport & Environment noted that manufacturers may obtain credits through production agreements or licensing deals with other companies. For example, Nissan has previously pooled credits with Renault to avoid EU penalties and last year entered a similar arrangement with BYD.

Who Stands to Gain?

Independent automotive analyst Matthias Schmidt believes that companies like Tesla, Volvo, Polestar, and Chinese brands such as BYD will benefit the most, as they have exceeded the mandated targets by the widest margins.

Nissan, which is producing its new Leaf electric vehicle in the UK, has argued that the ZEV mandate is outdated and does not reflect slowing demand for electric cars. Suzuki has stopped selling certain models in the UK in an effort to meet the requirements.

The four manufacturers mentioned were approached for comment.

Government Response and Support Measures

A spokesperson for the Department for Transport stated: “Our Electric Car Grant has enabled over 50,000 drivers to switch to electric vehicles, saving up to £3,750 on a new EV. This helps families save money and supports the industry in reaching its sales targets.”

“We are expanding the UK’s charging infrastructure by supporting local councils to install 100,000 additional public charge points and reducing the cost of home charger installations.”

“The industry is making progress towards its electric vehicle goals, and last year we introduced more flexible options so manufacturers can meet targets in various ways, not just through direct sales.”