The Trump administration’s decision to impose a 25% tariff on cars and auto parts imported into the US sent shockwaves across the industry. The UK government was quick to respond: it relaxed electric vehicle sales targets to reduce the pressure on the British car industry – a move that has garnered mixed responses.

The auto tariffs, first announced in late March, came into effect for completed vehicles on 3 April, with the duties for auto parts set to start 30 days later. They are separate to a 10% “reciprocal tax” on UK goods, which cars are exempt of. 

The US is a key export market for British automakers, who primarily sell luxury and premium cars to the country. With one in eight UK-built cars exported to the US, over 25,000 UK jobs are at risk from the tariffs, says a report from the Institute for Public Policy Research (IPPR).

Major exporter Jaguar Land Rover has already announced a temporary pause on shipments to the US as it “addresses the new trading terms.”

The UK government’s response was to weaken the zero-emission vehicle (ZEV) mandate, a decision, it says, would give “certainty, stability and support” to British car brands amid the “global economic headwinds.”

“Global trade is being transformed so we must go further and faster in reshaping our economy and our country through our plan for change,” Prime Minister Keir Starmer adds.

The “bold changes” include allowing full hybrid and plug-in hybrid cars to be sold until 2035, while the 2030 phase-out date for new petrol and diesel cars remains unchanged. Fines for those not meeting the country’s zero-emission vehicle (ZEV) mandate targets will drop to £12,000 ($15,888) per car from the current £15,000 fee. Small manufacturers, such as luxury supercar firms McLaren and Aston Martin, can continue producing internal combustion engine (ICE) cars beyond 2030.

As most of the British car exports to the US are ICE vehicles, some experts say that the auto tariffs will have a limited direct impact on the UK’s EV market. Companies such as Jaguar, which exports roughly 20% of cars made in the UK – either fully diesel or plug-in hybrids – to the US, will bear the brunt of the tariffs, explains Ben Nelmes, chief executive at the non-profit, New AutoMotive. 

The affected companies will now have to seek a new export market or try to expand their domestic market share. “But I don’t know whether that strategy will prove successful, because I don’t get the impression that there are that many more customers in the UK who want to buy luxury cars,” he says in an interview.

Yet, most UK companies are expected to take a wait-and-see approach and postpone investments, according to Jon Mulcahy, lithium-ion battery supply chain specialist at SC Insights International, and Andy Palmer, ceo and founder of Palmer Energy Technologies.

Many automakers have long-term strategies, as design-to-new-vehicle-launch sometimes can take up to seven years. Moreover, manufacturers are “inevitably more concerned” about developing secure battery supply chains to be competitive in this segment, Mulcahy explains.

“The relocation of production facilities to the US seems improbable right now owing to the significant cost implications at a time of uncertainty,” he adds. “In addition, these types of facilities require significant planning, capital and expertise to develop and operate; it is not simply the case that these decisions can be taken and implemented in such a short timeframe.”

At the same time, Mulcahy believes there could be long-term impacts on the EV sector if automakers delay investments in battery supply chains. 

“The automotive industry is at a critical juncture, particularly with the increasing shift toward electrification and the immense pressure to establish robust and competitive battery supply chains,” he tells Kallanish. “The competition from Chinese automakers, who have a strong foothold in EV production, adds another layer of complexity. These new tariffs, combined with the existing challenges highlighted, are likely to put a further strain on UK-based automakers.”

“In addition, the tariffs are likely to have a significant effect on profit margins at a time when capital allocation into developing secure EV supply chains is critical,” Mulcahy continues. “Therefore, as well as disrupting current exports; we may see a delayed impact on UK automotive companies deciding to refrain from deploying capital in the battery supply chain.”

Palmer agrees, adding that there could be overhead absorption due to lower global volumes from being “locked out” of total US industry volume.  

Weakening ZEV targets: right move?

All things considered, Britain’s decision to weaken the ZEV mandate targets has received mixed responses from the industry. 

Mike Hawes, chief executive of UK auto industry group SMMT, welcomes the move, saying the government has “rightly listened to industry” and recognised the “intense pressure” manufacturers are facing. Yet, he calls for “greater action” to safeguard the industry’s competitiveness amid the “potentially severe headwinds.”

Others don’t believe that the move can necessarily help UK carmakers. “The UK car industry is an export industry, so they’re not directly affected by the EV targets,” says New AutoMotive’s Nelmes. “Changing a policy that governs the sale of vehicles is not really an effective way to help out carmakers here.”

A spokesperson for Transport & Environment (T&E) agrees, noting that weakening the ZEV mandate over the tariffs is “baffling,” especially since most UK car exports to the US are petrol and diesel. “Rolling back EV targets won’t protect those exports or jobs.”

While it was necessary to give original equipment manufacturers (OEMs) some flexibility amid the headwinds, Palmer adds the ZEV mandate also gives UK manufacturers “an edge in a very competitive world.”

“Allowing hybrids without a plug to be sold post 2030 is a big mistake; they are a combustion engine,” he cautions.

Some believe softening the targets would also impact the UK’s EV transition and its wider decarbonisation goals.

“The latest move to weaken the mandate will delay the EV transition by manufacturers,” the T&E spokesperson warns. “This is bad news for consumers as it will delay price reductions and the supply of affordable EVs. By adding yet more flexibilities for carmakers to comply, the government is wasting the opportunity to quickly decarbonise one of the biggest polluting sectors while making EVs more affordable.”

Echoing this, Nelmes says that while New AutoMotive previously expected around 4 million new electric cars to be registered in the UK between 2026 and 2029, this estimate will now likely be revised down by 500,000 electric cars. “That’s half a million cars worth of emissions. But also, half a million fewer households in the UK who are going to access the running cost savings of getting an EV.”

Yet, Mulcahy believes the transition to electrification is “inevitable.”

“Where we will see some implications is if tariffs escalate further,” he notes. “Many incumbent OEMs have diverse supply chains and produce different components in a range of different countries. Therefore, a protracted trade war could reduce the competitiveness of some of the legacy automakers.”

As the global trade war intensifies and the tariff chaos continues, the auto industry needs more certainty and government support.

T&E calls for regulatory certainty and a robust industrial strategy to support domestic manufacturing and help companies stay competitive as the world shifts to electric. The group’s recommendations include reforming car taxation to encourage carmakers to bring smaller and affordable EV models to the market. Bringing forward additional policies to advance the development of the charging network in underserved areas, as well as introducing standardised battery health testing and information, will also be important.

“In this vastly changed world, a package of measures is needed to support manufacturing, especially the supply chain, so our industry can deliver the economic growth, jobs and investment the country needs,” concludes SMMT’s Hawes.