The UK automotive sector is at a pivotal moment. Pressures to decarbonise are accelerating just as geopolitical instability, cost inflation and fragile supply chains test the resilience of manufacturers, retailers and consumers. Shoosmiths joined industry leaders last week at the SMMT Electrified summit and a clear consensus was echoed that while the direction of travel towards electrification is settled, the pace and design of policy must better reflect economic and market realities if the transition is to succeed.
Published: 17 March 2026
Authors: Sarah Owbridge
A sector at an inflection point
Opening the conference, Mike Hawes OBE, Chief Executive of the Society of Motor Manufacturers and Traders, emphasised the scale of the challenge facing the industry. Delivering growth and decarbonisation simultaneously now depends on sustained and active government intervention, particularly against a backdrop of disrupted global supply chains and intensifying international competition.
A central concern remains the UK’s trading relationship with the EU. Proposed EU legislation risks disadvantaging UK manufacturers and restricting access to fleet markets that represent around 60 percent of total volumes. Such outcomes would weaken UK competitiveness and potentially undermine wider Net Zero objectives.
Cost pressures are compounding these risks. Battery costs are around 30 percent higher than previously forecast, while electric vehicles remain, on average, 17% more expensive than internal combustion engine equivalents. Charging costs have also increased, driven by volatile energy prices, and European battery manufacturing capacity continues to underperform earlier expectations.
Against this backdrop, Hawes argued that the previously promised £1 billion of EV support is no longer sufficient. With the UK required to double EV market share across cars and vans over the next five years, he warned that the current ZEV mandate is unlikely to be met in its existing form. Industry called for the planned 2027 review to be brought forward, stressing that failure to adapt risks deindustrialisation.
Government commitment under pressure
The government keynote, delivered by Keir Mather MP, Minister for Aviation, Maritime and Decarbonisation, acknowledged both the ambition and the difficulty of delivery. With EVs still accounting for a relatively small proportion of total registrations, progress remains constrained by cost-of-living pressures, high interest rates and supply chain disruption.
Mather reaffirmed the government’s commitment to electrification, arguing that global instability strengthens rather than weakens the case for regulation. He accepted, however, that upfront cost remains the single biggest barrier to adoption. Progress to date includes more than 78,000 public charge points installed across the UK, now exceeding the number of fuel pumps.
Looking ahead, policy priorities include improving affordability, reviewing grant support, reforming public charging costs and expanding access to home charging. While the early 2030s remain the target window for mass transition, flexibility in delivery was recognised as essential.
Competing in a global market
Industry perspectives highlighted the intensity of global competition. Martin Sander of Volkswagen Passenger Cars pointed to the scale and speed of Chinese OEMs, which by 2026 are expected to launch multiple new energy vehicle models, setting benchmarks for cost efficiency and speed to market.
Electrification is also reshaping traditional business models. EVs generate significantly lower aftersales revenues than ICE vehicles, while artificial intelligence is increasingly embedded across development, sales and aftersales. Volkswagen’s response centres on affordability, strategic partnerships and continued investment in autonomy, alternative fuels and digitalisation. Sander cautioned that protectionism alone will not restore competitiveness in a market where Chinese manufacturers have operated at scale for decades.
Bridging regulation and consumer demand
A panel featuring senior leaders from Volvo, Toyota, Stellantis and JLR explored the tension between regulatory ambition and consumer readiness. While EVs are expected to become the fastest-growing market segment within the next three to five years, misalignment between mandates and demand remains a concern, reflected in surplus ZEV credits in recent years.
There were, however, positive signals. Used EV values are stabilising, Volvo reported that electrified vehicles now account for more than half of its UK sales, and Toyota highlighted significant progress in reducing manufacturing emissions. Across the panel, there was agreement that consumers must be brought along at a pace that maintains confidence, with energy costs, skills and supply chain resilience all critical to success.
Commercial vehicles and infrastructure constraints
Challenges are more acute in the commercial vehicle and HGV segments. Lisa Brankin of Ford Motor Company highlighted higher upfront costs, infrastructure constraints and misaligned incentives as key barriers. Despite exceeding internal targets, manufacturers still face penalties under current regulations, prompting calls for an urgent policy review and a greater role for plug in hybrids during the transition.
In the HGV sector, infrastructure rather than vehicle availability is the primary constraint. Fixed routes, tight schedules and lengthy grid connection times mean access to power is the critical bottleneck. Panellists called for coordinated government action to secure grid capacity, reform weights and dimensions rules and support a multi technology approach including EVs, sustainable fuels and hydrogen.
A call for coordinated action
Closing the conference, Mike Hawes returned to the need for alignment. Delivery costs under the current framework are unsustainable, and geopolitical instability is likely to persist. Success will depend on government and industry working together with a stable, realistic and coordinated approach. Without this, the UK risks falling behind in the global race to secure a competitive, decarbonised automotive future.