The UK new car market could exceed two million sales in 2024 but the ZEV mandate could impact supplies, Cox Automotive has warned.

Positivity stems primarily from the relatively healthy start to the year for new car registrations, but questions remain about the ZEV mandate’s effect on the sector

The company, parent firm of Manheim Auctions, has published its latest Insight Quarterly (IQ) report – outlining areas of positivity while also warning that the UK’s ZEV mandate could prompt a fall in new vehicle availability.

Positivity stems primarily from the relatively healthy start to the year for new car registrations, which were up 10.4% year-on-year in Q1. However, questions remain about the ZEV mandate’s effect on the sector, what will happen after the next general election, and when the market will finally return to its pre-pandemic normality.

Based on the strong start to the year, Cox Automotive has adjusted its ‘baseline’ forecast for 2024 upwards and now projects registrations will surpass two million cars, with a potential ‘upside’ scenario seeing it stretch beyond 2.2 million.

The rethink is based upon a more robust performance in the second half of the year buoyed by signs of economic stabilisation alongside the imperative for manufacturers to gain market share while meeting ZEV mandate obligations.

However, Philip Nothard, insight director at Cox Automotive, has sounded a note of caution as he pointed out that the 10.4% rise in Q1 is still 17.9% behind the pre-pandemic average for registrations recorded between 2000 and 2019.

He also warned that the first-quarter growth numbers are compounded by the market share figures of private registrations. Standing at 40.4%, they are 8% lower than the figure year-on-year.

On top of this, consumer doubts about the transition to electric remain, potentially fuelled by EV affordability and infrastructure fears.

Nothard also said that the launch of the ZEV mandate in the UK this year could also impact the market.

The regulation requires manufacturers to sell an increasing percentage of zero-emission vehicles (ZEVs) each year until the ICE ban deadline in 2035 – backed by a hefty per-car fine of £15,000.

Manufacturers can avoid the fines in a few ways, including borrowing a limited number of ZEV ‘allowances’ until 2026 – which, Cox Automotive pointed out, gives OEMs some breathing room if they struggle to meet the target in a particular year. However, the borrowing is capped and comes with a considerable 3.5% annual interest fee to motivate compliance.

Philip Nothard, insight director, Cox Automotive

And Nothard warned there is talk they could go further. For example, one way to achieve the 22% figure is to simply reduce volume in the UK market.

He explained: “With the UK’s ICE ban deadline U-turn, a palpable lack of help for the sector in the most recent budget, such as the Government addressing the VAT discrepancy between domestic and public charging, it may well be that an unintended consequence of the ZEV mandate could be a drop in the supply of new vehicles.

“Manufacturers looking at the UK market may change tack and opt to put their cars into less stringent markets in other parts of the world. It’s still early days, but clarity on how the sector will react in the inaugural year of the mandate has yet to materialise.”

In Q1, EV registrations stood at 15.5% of market share, a year-on-year increase of 0.1%. =At a critical time for UK automotive, growth continues to be driven by fleet investments and private buyers remain reluctant to go electric while manufacturers push for EV demand.

Nothard concluded: “With an election looming, we will have to wait and see whether any new administration delivers the help needed to accelerate our sector’s overdue recovery.”

Cox Automotive’s IQ is available now to view here.