On 14 August 2026, the UK Government launched a consultation on the Vehicle Emissions Trading Schemes (VETS) Order, the legal instrument that underpins the UK's Zero Emission Vehicle (ZEV) Mandate. Evidence gathered through the process may inform potential future amendments to the VETS Order itself, with the Government committed to completing its review by early 2027.

The consultation deadline is 23 October 2026. Businesses with a material interest in the outcome should be considering whether to engage.

What is the legal framework?

The ZEV Mandate is a legally binding policy that requires car and van manufacturers to sell a rising minimum percentage of zero-emission vehicles each year, incorporating compliance flexibilities such as credit trading, banking and borrowing to help brands meet their quotas. It was officially introduced and passed into law in January 2024.

The consultation is conducted jointly by the UK Government, the Scottish Government, the Welsh Government and the Department for Infrastructure in Northern Ireland, reflecting the devolved nature of the legislation. The overarching end targets, phasing out new petrol and diesel cars by 2030 and requiring all new cars and vans to be fully zero emission by 2035, are not under review. What is under review is the annual trajectory for getting there.

Part 5 of the consultation, which addresses the definition of the phase-out of new cars relying solely on internal combustion engines by 2030, falls under UK Parliament's jurisdiction and is being consulted on separately.

What is being consulted on

The consultation seeks views on the current ZEV trajectory and yearly headline targets, the effectiveness of existing compliance flexibilities, alternative policy approaches, and other potential technical updates.

For passenger cars, four alternative pathways are being explored in addition to the current trajectory, which requires 80% of manufacturer sales to be zero emission by 2030. These include trajectories reaching 70%, 60% and 50% by 2030, as well as maintaining the existing 80% headline target but with extended compliance flexibilities.

For vans, the consultation explores four alternatives to the current 70% target for 2030, proposing lower headline targets of 60%, 50% and 40%, or maintaining the 70% target with extended flexibilities to 2034.

The review also examines what the government describes as the 'PHEV Loophole': new plug-in hybrid electric vehicles (PHEVs) have seen rapid market growth, and new entrants are using a 'utility factor' flexibility to offset ZEV targets through hybrid sales rather than true zero-emission deployment, something the Government says risks eroding expected carbon savings.

What are the legal and commercial implications?

The significance of this consultation extends well beyond a change in a percentage figure. Manufacturers, suppliers, fleet operators and infrastructure businesses have committed capital to specific plans based on the current legal trajectory. A change in the VETS Order, in any direction, has direct consequences for existing contractual arrangements and future investment decisions.

The key legal questions businesses should be examining now include:

• Commercial contract exposure: Supply agreements, offtake arrangements and long-term purchase contracts may have been structured around specific EV production volume assumptions or powertrain mix projections. Businesses should review whether those contracts provide adequate flexibility if the regulatory trajectory changes materially, including the treatment of rolling forecasts, volume tolerance bands, pricing and indexation mechanisms, and provisions dealing with technology change or model discontinuation.
• Material adverse change and force majeure: Where existing agreements were negotiated with the current VETS Order trajectory in mind, a significant regulatory amendment may give rise to questions about whether contractual relief provisions are triggered, or conversely, whether the absence of such provisions leaves a party exposed.
• Investment and capacity planning: Automotive investment decisions operate on long lead times. Businesses with capital committed to EV-specific production capacity, battery programmes or charging infrastructure need to understand how different consultation outcomes (including a 2030 car target as low as 50%) would affect their projected returns and whether existing arrangements adequately manage that risk.
• The PHEV question: For businesses with commercial exposure to the PHEV segment, the potential closure of the utility factor flexibility is a separate and distinct legal risk that warrants specific attention.

Should you respond to the consultation?

The consultation calls on vehicle manufacturers, suppliers, charge point operators, dealers, consumers and communities for their views. Businesses across the automotive supply chain, fleet, charging infrastructure and energy sectors all have a legitimate interest in the outcome.

A well-drafted consultation response can directly influence the shape of the revised VETS Order. It should be grounded in specific commercial evidence, not generalised observations, and should address the policy options as framed in the consultation document. Legal advisers can assist in ensuring a response is precise, evidenced and appropriately targeted.

How we can help

Our automotive, commercial and infrastructure teams advise businesses across the full breadth of the UK's automotive and clean energy supply chain. We are tracking the consultation closely and will publish further analysis as the review progresses.

If you would like advice on reviewing commercial contract exposure, assessing investment risk arising from a change in the VETS Order trajectory, or preparing a consultation response, please contact our automotive team.