Can electric car discounts stand the test of time?

A major industry body has warned that carmakers are being forced to slash prices to meet government targets, even though demand from drivers isn’t keeping up.

The number of new cars registered in the UK in 2025 topped two million for the first time since the pandemic, according to new figures from the Society of Motor Manufacturers and Traders (SMMT).

Over 470,000 of those were battery electric vehicles (BEVs), meaning roughly one in four new cars sold were electric. That’s a huge increase compared with the year before – but still short of what the government wants.

Under current rules, known as the Zero Emission Vehicles (ZEV) Mandate, electric cars were meant to make up 28% of all new sales last year. In reality, they accounted for 23.4%.

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Why are electric cars being discounted so heavily?

To avoid fines for missing the ZEV targets, carmakers have been offering thousands of pounds off electric cars. The SMMT estimates those discounts cost the industry more than £5bn last year – that’s £11,000 per EV sold.

Mike Hawes, chief executive of SMMT, said this approach is “unsustainable,” especially as the electric sales target rises to 33% this year. “Electric sales are increasing,” he said, “but the question is: at what cost?”

What does this mean for buyers?

For now, you can enjoy lower prices and strong incentives. However, the industry warns that today’s bargains may not last, particularly if manufacturers can’t keep absorbing the losses.

Carmakers say the gap between what buyers want and what the government requires them to sell is growing – and that could eventually affect pricing, model availability, or investment.

Government rules are only adding pressure

If manufacturers miss their electric sales targets, they can face heavy fines. However, there are ways to soften the blow, such as improving emissions from petrol and diesel models, or buying “emissions credits” from other companies that exceeded their own targets.

These flexibilities were expanded last year after lobbying from the industry, and fines were reduced.

Still, the SMMT wants the government to bring forward a planned review of the rules, currently scheduled for 2027, to reflect rising energy costs and more expensive raw materials.

Hawes stressed the industry remains committed to electric cars: “Manufacturers have invested too much to turn back – but the market has to reflect real consumer demand.”

Mixed messages for drivers

The government has introduced incentives to encourage EV uptake, including its £2bn Electric Car Grant, offering up to £3,750 off a new EV, and significant investment in charging infrastructure.

However, it has also announced plans for a pay-per-mile tax on electric cars from 2028, designed to replace falling fuel duty revenues.

The government’s own watchdog, the Office for Budget Responsibility, says the incentives could boost EV sales by around 320,000 over five years – but the new tax could reduce sales by 440,000, resulting in a net fall.

“That sends a very conflicting message to consumers,” Hawes said.

So, what happens next?

Some manufacturers, including Stellantis (which owns Vauxhall, Peugeot, and Citroen), say the UK risks “falling out of step with Europe” and want an urgent review of the rules.

Others point to continued consumer interest. Philipp Sayler von Amende, global chief commercial officer at Carwow, says enquiries suggest sales momentum will continue into early 2026, despite concerns over future taxes.

The government also insists its approach is working. Transport minister Keir Mather said investment is “driving EV uptake,” with electric sales up nearly 24% year on year.

For drivers, the message is clear: electric cars are becoming more common – but be aware that today’s generous discounts may not be around forever.

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