ZEV Mandate Flexibilities: Why Vans, Not Cars, Are the Regulation's Real Test

The ZEV mandate is usually discussed as a car policy. The headline numbers everyone quotes, 33% of new cars this year, 38% next, belong to the passenger market. But the regulation actually governs two markets at once, cars and vans, and the van side is where the mechanism is being tested hardest. This month the government opened a formal review of the whole scheme, and the way flexibilities are carrying the van market sits at the centre of that conversation. To understand what might change, it helps to understand what the rules actually allow.

The gap, in numbers

Start with the 2025 scorecard. Battery electric cars took 23.4% of new car registrations, against a mandate requirement of 28%. Vans did worse: a 16% headline target was met with just 9.5% electric van sales, in an overall van market that slumped 10%. Both markets missed their headline numbers, and yet both officially complied with the mandate. That paradox is the flexibilities at work, and it is worth being clear about how.

The government's own review consultation, published on 14 August, confirms the position: the UK market has complied with the ZEV mandate to date, and based on provisional 2025 data both the car and van markets are expected to exceed the requirements through a combination of ZEV sales and use of the flexibilities. The regulation, in other words, was never designed to force every manufacturer to hit the headline percentage through sales alone. It is a trading scheme, and the headline target is one input among several.

What the flexibilities actually are

The mandate gives manufacturers several routes to compliance beyond raw electric sales. We cover the core mechanism, trading certificates between over- and under-performing manufacturers, in our guide to credit trading. The three flexibilities that matter most right now are different.

The first is the transfer of CO2 credits. Manufacturers can offset a portion of their ZEV shortfall by selling non-electric vehicles with emissions below their allowed baseline, which in practice means plug-in hybrids. Under the original design this route shrank quickly and expired after 2026. The changes announced in April 2025, legislated in October 2025 and in force since January 2026, extended it through 2029 at much more generous levels: up to 90% of a manufacturer's 2025 credit requirement, tapering to 50% by 2029. The ICCT's analysis noted this makes the scheme behave more like a technology-neutral CO2 standard for several years, rewarding hybrids as well as pure electric sales.

The second is borrowing. Manufacturers can bring forward allowances from future years, within limits of 20% in 2027, 15% in 2028 and 10% in 2029, all repayable by 2030 with a 3.5% interest rate attached. It is a smoothing device: a manufacturer facing a weak demand year can comply now and catch up later, rather than discounting cars into oblivion or paying fines.

The third is the one that links this story together: the bidirectional transfer between car and van compliance, available for the first time in the 2025 scheme year. A manufacturer whose electric car sales run ahead of requirement can use the surplus credits to cover a van shortfall, and vice versa. For groups that sell plenty of electric cars but struggle to shift electric vans, this has become the single most important valve in the system, and it is a large part of why a 9.5% van share could coexist with official compliance.

Why vans are the hard case

The van market's difficulty is not reluctance to build the products. Almost two-thirds of new van models are now available as zero-emission versions, and the choice keeps growing. The demand side is the constraint. Vans are working tools bought by businesses that calculate cost per delivery, and the calculation currently stacks up awkwardly: higher purchase prices, concerns about payload and range, and depot charging that requires capital investment with long payback periods.

The government's own modelling in the review consultation spells out the distance still to travel: electric van sales would need to grow by an average of 52% per year from 2025 to 2030, against an average annual growth rate of 18% across 2022 to 2025. That required acceleration, nearly triple the recent pace, sits behind every discussion about whether the trajectory is deliverable. The step-up in targets sharpens the question: from 2027 the headline requirements jump to 52% for cars and 46% for vans, and the SMMT argues that natural demand will not deliver a doubling of electric car share, let alone the roughly fivefold increase in electric van share, in two years.

The industry's other complaint is cost. Manufacturers estimate they have bridged the gap between ambition and demand through more than £10 billion of discounting over the past two years, alongside the flexibilities. Their argument is not that the transition is wrong but that compelling supply while demand lags is expensive, and that the money would be better spent on products and plants than on margin-destroying discounts.

The review now on the table

Against that backdrop, the Department for Transport opened the ZEV mandate review consultation on 14 August 2026, running until 23 October. It consults jointly with the Scottish, Welsh and Northern Ireland administrations, and it covers the mandate's impact, its emerging issues, and policy options including the trajectory of yearly targets, the effectiveness of existing flexibilities, new credit mechanisms, and compliance payment levels.

The consultation presents four alternative trajectories for cars and vans alongside the existing one, with the extension of flexibilities considered in scope for all of them. One option keeps the headline targets but extends key flexibilities beyond their current 2029 end date, which for vans would mean continued compliance through a mix of sales and credits rather than the raw percentages alone. Independent forecasts cited in the consultation, such as BNEF's projection of 67% plug-in share of UK car sales by 2030, suggest the current targets sit above what the market could comfortably achieve without adjustment.

Two anchors are not moving, at least for now: the commitment to review the order by early 2027 has been met by this consultation, and the destination of 100% zero-emission new car and van sales by 2035 remains government policy. The review is about the pace and the plumbing, not the destination.

What it means for buyers

For anyone shopping this year or next, the practical read is stability with a question mark. The 2026 targets are unchanged, so the discounting pressure that produces attractive EV deals is likely to continue, which is a genuine silver lining for buyers, as we noted in our July registrations analysis. The outcome of the review, expected in legislation after the October deadline, will shape how steep the climb becomes from 2027. For van buyers in particular, the combination of the Plug-in Van Grant, expanding model choice and competitive pricing makes the next year or so a good window, whatever trajectory the government settles on. The wider market context is in our EV mandate gap analysis.

The honest summary of the flexibilities debate is that it is a disagreement about pace, not direction. Electric van sales are growing, at double-digit rates year on year from a small base, and the mandate's designers built the trading system precisely so the transition could flex where the market is uneven. The review now underway will decide whether that flexing continues quietly in the background or becomes the defining feature of the scheme. For the white van, the next eighteen months will say a lot about whether the UK's van market can follow the car market's curve or needs a gentler one of its own.