The UK automotive industry is warning that new European Union proposals could damage the long-standing trade relationship between Britain and its largest export market.
According to the Society of Motor Manufacturers and Traders (SMMT) chief executive Mike Hawes, draft measures under the European Commission’s proposed Industrial Accelerator Act risk placing UK-built vehicles at a competitive disadvantage in Europe.
The trade body said the proposed “Made in Europe” provisions could restrict incentives to vehicles assembled within the EU, potentially excluding UK manufacturers from support schemes that cover a significant portion of the new car market.
EU rules could disadvantage UK-built cars
Under the current proposals, strict EU assembly requirements and EU27 eligibility criteria would apply to schemes supporting the electrification of corporate fleets and small electric vehicles.
Hawes is warning the measures could disrupt a trading relationship worth close to £70bn annually:
“The ‘Made in Europe’ proposals set out last week in the European Commission’s Industrial Accelerator Act are concerning for the UK sector given, as drafted, they would discriminate against UK-made vehicles and components – damaging a trading relationship worth almost £70 billion annually.”
He said it is a position that the UK industry and government sought to avoid, given Britain and the EU are each other’s largest customers and suppliers.
The strict EU assembly rules and EU27 eligibility criteria being proposed would effectively put UK manufacturers at a systemic competitive disadvantage, with financial support for the greening of corporate fleets – potentially affecting 50-60% of the EU new car market – and ‘supercredits’ for small electric vehicles offered exclusively to vehicles assembled in the EU, rather than elsewhere in countries with which the EU has a preferential trade agreement.
“That puts up barriers between the UK and its largest export market and may also be in breach of the EU-UK Trade Cooperation Agreement – the Brexit deal – which both sides had worked at great length to secure,” said Hawes.
“Finding a resolution – extending full, trusted partner status to the UK automotive sector – is not only about ensuring choice for consumers, particularly of zero emission vehicles, on both sides of the Channel. It is also about delivering the economic growth and security everyone craves, which is why the UK government and European counterparts must work together, urgently, to resolve the situation.”
EV demand still below ZEV targets
Alongside the trade concerns, the SMMT also highlighted improving but still insufficient momentum in the UK’s electric vehicle transition.
Latest SMMT figures show new car registrations rose 7.2% in February, marking the strongest performance for the month since 2004. Growth was largely driven by private buyers, although fleet registrations remain the biggest contributor to overall demand.
Electric vehicle registrations also increased, rising 2.8% year-on-year and accounting for almost a quarter of the market.
However, Hawes warned that uptake remains well below the 33% share required under the UK’s ZEV mandate for 2026, despite significant investment from manufacturers and government.
“Manufacturers, with a combination of new models and massive incentives, and government, with its grant scheme and new advertising campaign, have invested billions to drive uptake. The first two months of 2026 show how natural demand still lags ambition for passenger cars but also – to an even greater extent – for vans. Modest overall growth of 1.1%, and a rise in electric van demand is certainly good news, but EV uptake remains less than half of this year’s mandated targets.
“Furthermore, with Government plans to introduce a pay per mile tax for electric cars from 2028 and the sale of new pure petrol and diesel cars required to cease in less than four years, the pressure on manufacturers to increase demand is acute. Circumstances have changed beyond expectation since the ZEV Mandate regulation was set and, indeed, global uncertainty shows no sign of easing so a holistic review of the transition is needed urgently.”