ZEV Mandate Series Part 5: Credit Uplifts & the Future of the UK’s Vehicle Parc

This piece is the fifth in a six-part series New AutoMotive is releasing during the ongoing consultation period for the UK’s Zero Emissions (ZEV) Mandate, over April-May. This series will examine the current government proposals around the Mandate in detail, as well as putting the policy framework into its broader context. In addition to publishing this blog series and submitting a formal consultation response, New AutoMotive will be hosting a webinar event around the ZEV Mandate and the current consultation in the coming weeks. If you are interested in attending this webinar event, you can register your details here.

The ZEV Mandate offers the British government the opportunity to shape the future of the UK’s vehicle parc. One of the ways the government is able to do this through offering specific vehicles a ‘credit uplift’ within the scheme, thus making them more profitable for the manufacturers to produce and incentivising their sale. These credit uplifts add another layer of complexity to the scheme and, given this, must clearly work to help achieve specific goals for the government, such as an increase in emissions captured.

So, What is a Credit Uplift?

A credit uplift is when a vehicle is assigned an additional credit value, on top of its usual credit value. A credit uplift may be applied to certain vehicle types, or when a vehicle is sold in certain circumstances or for a certain use. The government is able to determine the circumstances in which a vehicle is eligible for a credit uplift, and can use this lever as a means to encourage the sale of certain vehicle types, or of vehicles to certain groups. Generally, credit uplifts should be used to either help ensure an equitable transition (by incentivising the sale of vehicles to certain demographic groups, like lower income/higher mileage drivers) or to help reduce carbon emissions at a more rapid rate (by incentivising the sale of ZEVs in high mileage use cases for example).

Within the most recent proposals for the ZEV Mandate, there are currently two proposed credit uplifts:

Credit Uplift 1) Special Purpose Vehicles (SPVs)

Although SPVs are exempt from the scheme, any zero emission SPVs will be granted 1 credit which will go towards compliance with the scheme. If a manufacturer is over compliant, these credits can also be used to bank, borrow or trade as per the rules of the mandate. This is not technically an uplift, as these vehicles will be assigned a value the same as any other ZEV in the scheme. However, the first true credit uplift will be given to a specific type of SPV; Wheelchair Accessible Vehicles (WAVs). A WAV is a vehicle which has been designed or retrofitted to accommodate wheelchair users, either as drivers or as passengers. These vehicles will earn manufacturers 1.5 credits per sale. The majority of these vehicles will be categorised as vans, due to the fact that wheelchair accessible vehicles tend to be larger than traditional passenger cars. The government has stated that this credit uplift is in place to ensure that manufacturers are incentivised to produce and sell WAVs. It is important that no group is excluded from the transition to electric transport, and that all are able to benefit from lower running costs and cleaner transport as early as possible. This move by the government has a clear and obvious motivation, and affirms their commitment to a just and equitable transition.

Credit Uplift 2) Car Clubs

The second area which the government has decided to target via a credit uplift is vehicles that are being bought to be used in a car club. Any vehicle being sold to be used within a car club will be eligible for an extra 0.5 credit on top of its usual credit value. In order to demonstrate a vehicle is eligible, the manufacturer must provide evidence that the vehicle meets the minimum existing standards for car club vehicles, and that the vehicle will remain in the car club fleet for at least two years. If a vehicle does not remain in a car club for two years the credit uplift of 0.5 will be retroactively removed. This may cause some administrative issues for manufacturers as when they sell their vehicle to car clubs there is no contract on how long the vehicle has to be in the car club for. However, this does ensure it is more difficult for manufacturers to cheat the system and manufacturers may start to incorporate contracts to ensure the cars remain active in the car club fleet for this period of time.

The government has singled out car clubs as the group of vehicles which they want to uplift. They have stated that this does not include traditional hire vehicles, or peer-to-peer services which exist. The government has again stated that their motivation behind this credit uplift is to ensure a just transition, through opening up the benefits of EV ownership to those who may not be able to afford to purchase a vehicle in a more traditional way. This is positive; as credit uplifts complicate the Mandate, they must be effective and purpose driven to ensure they provide value - this credit uplift is both, and should help ensure a more equitable transition.

Impact on Manufacturers

These credit uplifts for vehicles the government wants to encourage onto the UK market should incentivise manufacturers to focus on supplying these vehicles. In order for them to have the most impact, it is important that there is a credit deficit within the scheme. This means that manufacturers will then need these credits to either comply, bank, or sell for a high price due to a shortage of credits. However, if there is a surplus of credits, meaning manufacturers are able to meet their targets easily and credits are priced at a lower price, then they will have minimal impact on the scheme as manufacturers will have no incentive to gain extra credits. How well these credits affect what manufacturers focus on depends on how well the scheme has been designed overall.

Conclusion

New AutoMotive is currently analysing the details of the government’s proposals, and preparing its formal response to the ZEV Mandate consultation. Submissions to this consultation can be made here. In addition to this blog series and a formal consultation response, New AutoMotive will be hosting a webinar event around the ZEV Mandate and the current consultation in the coming weeks. If you are interested in attending this webinar event, you can register your details at the link here, and we will reach out to you with more details as they develop.