EV discounts strain market growth
EV discounts strain market growth
The UK new car market passed an important milestone in 2025, with registrations topping two million vehicles for the first time since the pandemic. A total of 2,020,373 new cars were registered, marking the third consecutive year of growth.
That said, the market still hasn’t returned to pre-pandemic levels. In 2019, registrations were closer to 2.3 million, so while momentum has returned, it hasn’t fully recovered.
EV growth
Electric vehicles made up a growing share of the market. In 2025, 473,340 EVs were registered, accounting for 23.4% of all new cars. That’s a solid increase on 2024, but still well short of the Government’s 28% target under the Zero Emission Vehicles (ZEV) Mandate.
The mandate requires manufacturers to hit rising annual EV sales targets or face financial penalties.
According to the Society of Motor Manufacturers and Traders, the industry is increasingly relying on heavy discounting, often worth several thousand pounds per vehicle, to stimulate demand. Their concern is that this approach isn’t sustainable and that consumer appetite isn’t keeping pace with regulatory ambition.
Mandate flexibility — and softer penalties
The ZEV Mandate does allow some flexibility, including emissions credit trading and fleet-wide averaging. Following industry pressure, these flexibilities were further relaxed in April, and potential fines for non-compliance were reduced.
This has eased pressure on manufacturers in the short term, but it doesn’t solve the underlying issue: demand still needs to grow without permanent reliance on discounts.
Government incentives — and mixed signals
Government support has included a £2bn Electric Car Grant Scheme, offering up to £3,750 per vehicle, alongside continued investment in charging infrastructure.
However, plans announced in the Autumn Budget to introduce a per-mile tax on EVs risk dampening demand just as uptake needs to accelerate.
The Office for Budget Responsibility estimates that incentives could add 320,000 EV sales over five years, but the proposed tax may reduce sales by around 440,000 overall.
Transport Minister Keir Mather said Government action was driving uptake, pointing to EV sales being nearly 24% higher year-on-year.
What this means for businesses
For manufacturers, dealers and fleet operators, the picture is mixed. Volumes are improving, but margins are under pressure. Discount-led growth can boost registrations, but it also strains profitability and long-term planning.
For businesses considering EV fleets, this environment creates opportunity, but also uncertainty. Grants, pricing, tax treatment and running costs all need to be weighed carefully.
As with many policy-led markets, success will depend on balancing incentives, regulation and genuine consumer demand — not just hitting targets on paper.
