The government will look into rules on the number of electric vehicles carmakers must produce each year, Rachel Reeves has said.
The chancellor confirmed the government has launched a consultation “to look at the plans we inherited from the previous government”.
Carmakers are currently required to sell a higher proportion of electric vehicles (EVs) each year up to the 2035 petrol and diesel ban, or face fines.
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The rules, brought in by the Conservative government, came into force earlier this year.
However, the public demand for EVs has not kept up.
The chancellor’s announcement came the day after Vauxhall announced it will close its 120-year-old Luton van factory in April.
Stellantis, which owns Vauxhall, said the decision was made “within the context of the UK’s ZEV mandate” – the zero-emission vehicle mandate.
Carmakers have warned without urgent government intervention industry jobs and the UK’s appeal as a manufacturing hub are under threat.
Ms Reeves said: “It is really important to make sure that we get the balance right and [have] proper support for the automotive sector, the car industry, in Britain.
“We want people to buy electric vehicles, but we want to keep jobs, we want to keep investment in Britain, and we’re determined through the consultation to do just that.”
Business Secretary Jonathan Reynolds told the Society of Motor Manufacturers & Traders (SMMT) annual dinner on Tuesday night he is “profoundly concerned” by the way zero emissions policies work.
“I’m going to be frank with you – I don’t believe the policies that we have inherited, and I mean specifically in relation to zero-emission vehicles, are operating today in a way anyone intended them to,” he said.
“In fact, I am profoundly concerned by how that is working at the moment.”
Conservative shadow business secretary Andrew Griffith said the Luton plant closure “is just a downpayment on jobs that will be lost under this government’s relentless attack on industry, its neglect of the realities of business and its failure to meet its promise not to raise taxes”.
Suggestions for what the government could change include making the mandate more flexible, such as allowing carmakers to buy credits from manufacturers who exceed targets, such as Chinese EV maker BYD, or Elon Musk’s Tesla.
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The government could consider allowing carmakers to buy credits from other manufacturers who exceed targets. Pic: AP
The target this year was for 22% of cars to be electric, rising to 28% next year.
For every sale outside the mandate, manufacturers are fined £15,000.
When the targets were introduced, the industry forecast EVs would account for 23% of sales.
This year, while EV sales are the only sector still rising, they account for just 18% of the total.
For months manufacturers have been united in criticising the targets, saying they do not reflect softening consumer demand for EVs, risk making the UK uncompetitive for investment, and calling for government action to incentivise private sales.