Labour to relax electric car rules as UK carmakers delay investment

The Labour government is set to relax rules requiring carmakers to sell an increasing share of electric vehicles each year. Business Secretary Jonathan Reynolds indicated the zero emission vehicle mandate would be weakened, as reported by The Guardian on 30 July 2026. The move follows pressure from the UK car industry, which has delayed investment in British factories until the rules are eased.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said manufacturers were holding back on decisions about new models. He told The Guardian that companies were waiting for the mandate to be resolved. The SMMT’s latest figures show UK vehicle production fell 7.5% in the first half of 2026 compared with the same period in 2025. Factories built 386,000 cars and commercial vehicles in that time.

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Industry pressure and environmental opposition

The car industry has argued that the mandate adds costs at a time of fierce competition from China and US tariffs. Environmental groups and the electric car charging sector oppose any changes. They warn that weakening the rules could lead to millions of tonnes of additional carbon emissions, as reported by The Guardian.

Hawes did not name specific companies delaying investment. Toyota, which produces the Corolla in Derbyshire, and Mini, which postponed plans to build electric models at its Oxford plant, may be among them. Jaguar Land Rover is preparing new models, but its plans remain unclear.

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Nissan’s Sunderland decision still pending

Nissan is in talks to manufacture a car for the Chinese company Chery at its Sunderland plant. No final decision has been made, The Guardian reported. The plant, which employs around 6,000 people, has been a key site for UK car production since 1986.

Reynolds, who previously held the business brief under Labour, told the Financial Times on 29 July 2026 that a dilution of the mandate was likely. He said the government wanted to retain carmakers in the UK. Hawes said Reynolds had reassured the industry that the sector was a priority, following a conversation after he took office last week.

EU trade rules add uncertainty

The UK’s trading relationship with the EU could further affect investment. If no agreement is reached with Brussels, British carmakers may face tariffs on exports to their largest market. The EU’s rules of origin require batteries to be sourced from Europe to avoid duties. The EU is also considering rules that would limit subsidies to cars made within the bloc.

The European car industry has called for the UK, Morocco and Turkey to be included in the subsidies. Hawes said the EU trading relationship was a priority for Reynolds, according to The Guardian. The business secretary has not yet commented on whether the UK will seek inclusion in the EU’s subsidy scheme.

What happens next

The government is expected to announce changes to the zero emission vehicle mandate in the coming weeks. Carmakers will then decide whether to proceed with investment in UK plants. Nissan’s decision on the Chery model for Sunderland is likely to be one of the first major tests of the new policy.