Motorists thinking of buying an electric car risk losing hefty discounts unless they act sooner rather than later.

The cost of an electric vehicle (EV) – including second hand cars and hybrids – is set to rise significantly as it is likely that mandated sales targets for manufacturers will be watered down.

EV makers currently offer discounts of several thousand pounds on cars and SUVs – the average discount last year was £2,800 – in order to meet the targets.

These discounts could take a significant cut if manufacturers are not under so much pressure to sell their stock, experts say.

And, separately, if the Government decides to align with EU tariffs on Chinese EVs as part of efforts to get closer to Europe, it could add £12,600 to the cost of a Chinese model priced at £30,000. EVs produced in China are typically among some of the cheapest on the market.

Experts says the lowest price for electric cars is likely to be “right at this moment” and that they expect them to increase from 2027 and beyond.

Higher prices may lead to fewer sales of new cars which would also feed through into the second-hand market, reducing the supply of vehicles on sale and checking the reduction in prices in this market.

The Government’s Zero Emissions Vehicle (ZEV) mandate requires car makers to ensure that 33 per cent of the new cars they sell in 2026 are electric, with the target rising each year to 80 per cent by 2030. Manufacturers that fall short face a £12,000 fine for every vehicle they miss the target by, although there are ways to avoid penalties, such as buying credits from rivals that exceed their targets or offsetting emissions elsewhere in their vehicle fleets.

Companies that sell more EVs than required can earn extra income by selling these credits to manufacturers struggling to meet the targets. If the Government lowers the EV sales targets as expected, demand for the credits would fall, pushing down their value. That would hit firms such as Tesla and some Chinese brands, which rely heavily on EV sales and credit revenues, potentially leaving them with less scope to cut prices for consumers.

Ben Westerman, director of policy and advocacy at Electrify Britain – a body which campaigns for electrification – told The i Paper: “Lowering targets will almost certainly contribute to raised electric car prices. Strong targets encourage carmakers to offer discounts on new models. As most people buy second-hand, fewer electric cars now will mean fewer affordable ones in the future.”

What the discounts look like

Car firms have been heavily discounting electric vehicles in order to hit the sales targets. For example, the all electric Volvo EX40 – a luxury SUV – is advertised with a £4,250 discount – meaning the £48,860 vehicle is on the road for £44,610.

For cars priced under £37,000 the government is paying for an EV discount on new all electric cars of £3,750. This can also be combined with a manufacturer’s discount. An MG4 EV is available for £28,995, with a manufacturer’s discount of £1,500.

The Citroen e-C3 Urban Range is one of the most affordable EVs on the market retailing at around £19,995. This typically includes a £1,500 grant which is funded by the Government – but the EV mandate is also factored into the sale price.

If the Government reducing the EV mandate targets, this would likely result in companies offering smaller discounts on EVs.

Earlier this month, the transport minister Simon Lightwood said in response to a parliamentary question that the Department for Transport estimated that in 2025 the average additional cost of discounting for EVs was around £2,800 per vehicle for manufacturers.

The British automotive industry has been lobbying the Government to water down the mandate, however, arguing that car companies have been forced to spend billions on EV discounts, with the regime now threatening the viability of the industry.

Ministers will discuss the ZEV mandate at a meeting on Thursday to be chaired by Andy Burnham’s deputy, First Secretary of State Louise Haigh. An announcement is expected in the coming weeks, but industry sources think the EV target could be reduced to as low as 60 per cent of sales in 2030.

Second-hand market also impacted

Thom Groot, chief executive of The Electric Car Scheme – an EV salary sacrifice company – said that watering down the mandate would generally mean that carmakers would be under “less pressure” to manufacture EVs. “That means they will produce less, and therefore there’ll be less supply coming in to the market,” he said.

Groot added: “Less supply means prices go up. I think that will definitely happen… it will push prices up for UK consumers.”

He expects prices to begin rising in 2027 and beyond, and urged those considering switching to an electric car to “act now”.

Paul McNamee, director of the Labour Climate and Environment Forum, said increasing the upfront cost of EVs would go against Burnham’s drive to reduce the cost of living. “EVs are now cheaper than petrol vehicles upfront and household charging can save £1500 a year in running costs,” he said.

“The Government needs to back cheaper travel and action on the cost of living by maintaining the ZEV mandate and delivering an industrial strategy that builds a strong domestic EV manufacturing base.”

Why Chinese cars will also go up in price

While watering down the ZEV mandate would push up prices, a separate development could have an even bigger impact on Chinese EVs.

Burnham wants the UK to be part of the EU’s “Made in Europe” scheme, which could require Britain to align with the bloc’s tariffs on Chinese-made electric cars.

That would mean raising the UK’s tariff from 10 per cent to as much as 45 per cent. For a Chinese EV priced at £30,000 before tax, the final price could rise from about £39,600 to £52,200.

The outcome is not certain. Chinese manufacturers could absorb some of the extra cost, while the Government could retain its 10 per cent tariff or negotiate a lower rate with Brussels.

Groot said matching EU tariffs would hit the mid and cheapest end of the market and sharply reduce competition. Chinese EVs had been “20 to 30 per cent better value for money”, but that advantage would “evaporate overnight”, he said, adding that weaker competition would also push up prices for non-Chinese models.

Government subsidies remain

Despite these possible threats to prices, Government subsidies for certain EV models will remain. Under the Electric Car Grant, buyers can get a discount of up to £3,750 on eligible EVs with a starting price at or below £37,000. Others receive a lower discount rate of £1,500. Last month’s Budget confirmed funding for the grant until 2029-30.

The Government has insisted that no final decision has been made on either the ZEV mandate or tariffs, and that it is sticking to its commitment to phase out new cars that run only on petrol or diesel by 2030, with every new car and van required to be zero emission by 2035.