Pressure on carmakers to hit ZEV mandate targets will create an “unrealistic and unnatural market” that will impact future residual values, according to Cox Automotive.

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It’s warned of market volatility for the fourth quarter of 2024 as the ZEV mandate influences strategic and tactical activity on the part of many manufacturers.

Philip Nothard, Cox Automotive’s insight director, says that the headline numbers are actually positive, especially in the context of the last four years. Cox’s revised 2024 new car forecast predicts 2.02 million registrations across 2024; 6.1% up on 2023’s full-year volume.

The figure, however, is a 2.07% decrease on its previous baseline forecast and reflects the performance recorded by the SMMT in the first two quarters and the volatility expected in Q4.

Nothard commented: “We remain confident that our forecast of two million registrations for the full year is realistic. How this number will be achieved is a cause for concern.

“Several prominent manufacturers have made it clear that non-compliance with the ZEV mandate is not an option and that they have no intention of paying penalties. But with EV sales falling well short of where they need to be, this leaves them with just a handful of options if they are to meet this pledge.”

Carmakers are expected to either prioritise pushing EV stock into the market through “aggressive” fleet and retail price strategies, or restrict the availability of ICE and PHEV derivatives to force EV sales – and some are likely to do both.

Nothard says the pressure on manufacturers in Q4 could rival that experienced through the financial crash and pandemic.

He also cautions that this will create an “unrealistic and unnatural market”, with potentially far-reaching consequences over the long-term that include residual values, alongside manufacturer and dealer profitability and consumer choice.

“Manufacturers are caught between a rock and a hard place,” Nothard explained. “They’re under impossible financial pressure, facing increasing competition, and carrying the responsibility to fast-track the transition to zero-emission motoring. They have little choice but to push hard to make their EV products appealing to buyers, be that through financial incentives or by limiting the alternatives.”

This will result in fleets, dealer and private buyers being hit by “unpredictable” residual values when heavily discounted EVs start to flood the used market in 12-36 months.

“The year is progressing at pace, and with no government concession on the ZEV timetable or any support mechanisms in sight, the risk of significant challenge, unlike anything seen in over a decade, in Q4 is genuine,” stressed Nothard.

Cox Automotive’s full report on UK new car forecasts is available to view here.