Industry discounts for electric vehicles are “unsustainable”, a major motoring group has warned, as the number of new cars registered in the UK exceeded two million last year for the first time since the pandemic.

Nearly 500,000 of the new cars sold were electric, according to figures from the Society of Motor Manufacturers and Traders (SMMT).

SMMT chief executive, Mike Hawes, welcomed what he called a “reasonably solid result amid tough economic and geopolitical headwinds”.

But electric car sales were still not increasing fast enough to meet official targets, he said, warning of a growing gap between consumer demand and the government’s ambitions.

Discounts worth thousands per vehicle were “unsustainable”, he said.

In total, 2,020,373 new cars were registered in 2025, the third successive year of growth and the highest total since the pandemic.

However, it was still well short of the 2.3 million sold in 2019.

Electric cars accounted for 473,340 new registrations last year, giving them a market share of 23.4%.

That was a significant increase on 2024, but still below the government’s headline target of 28%, under what is known as the Zero Emission Vehicles Mandate (ZEV Mandate).

The mandate stipulates that carmakers which fail to sell enough electric cars, as a percentage of their overall sales, can face heavy fines.

However, there are concessions built into the rules which can enable them to avoid penalties, for example by reducing emissions from other vehicles in their fleets, or by buying surplus ’emissions credits’ from manufacturers which exceed their own targets.

These ‘flexibilities’ were extended in April, following heavy lobbying by some manufacturers, while the fines for failing to comply were reduced.

But Hawes warned that even so, carmakers were having to offer hefty discounts in order to sell enough electric models. The SMMT estimates those discounts were worth more than £5bn last year, or some £11,000 for every electric vehicle sold.

Hawes said this was unsustainable, especially with manufacturers expected to meet a more arduous target of 33% this year. He called on the government to bring forward a planned review of the ZEV Mandate, due to be carried out in 2027.

“It is increasing the number of battery electric vehicles (BEVs) being sold,” he said. “The question is, at what cost?”

Such a review, he suggested, should look at factors which have changed significantly since the targets were first planned, including a marked increase in energy prices and higher costs for raw materials, which have made life more difficult for car manufacturers.

He stopped short, however, of explicitly calling for the rules to be diluted further.

“Don’t get me wrong – the industry is not diverting course,” he insisted.

“It needs to sell these vehicles because it has invested so heavily in them. But you need to make sure the market reflects more closely the actual level of demand.”

Eurig Druce, group managing director for Stellantis in the UK, which owns brands such as Vauxhall, Peugeot and Citroen, called for the review of the ZEV Mandate to be brought forward to early this year as “the UK is increasingly out of step with the position in Europe and the rest of the world”.

Speaking to the BBC’s Today programme, he said speeding up the review would give manufacturers “certainty” when making investment decisions and also help “consumers to make the right choice for the cars that they want to buy for their future”.

Some commentators are more positive about the ZEV Mandate, however.

Colin Walker of the Energy and Climate intelligence Unit, an environmental research group, welcomed the latest registration figures.

“2025 has been another bumper year for EV sales, with nearly one in four cars sold in 2025 being an EV,” he said.

“This policy in turn will boost the UK’s second-hand market where the majority of us buy our cars, easing cost of living concerns for drivers.”

But Ginny Buckley, chief executive of the EV consumer advice site Electrifying.com, warned that many drivers still did not feel confident about the prospect of driving an EV.

“Moving EV sales from one in four new cars to one in three by the end of the year won’t happen on momentum alone. Alongside the growing choice of EVs, buyers need confidence, clear messaging and policy stability.”

The government has brought forward a number of measures to support the take-up of electric vehicles over the past year.

They include the £2bn Electric Car Grant Scheme, which provides up to £3,750 towards the cost of buying an electric vehicle, as well as significant funding for charging infrastructure.

However, in the autumn Budget, it also announced plans to introduce a “per mile” tax on electric vehicles – a measure designed to offset some of the reduction in fuel duty revenues caused by the transition to electric vehicles.

According to the independent Office for Budget Responsibility, the incentives could generate about 320,000 extra EV sales over a five-year period. But it says the new tax is likely to counteract that by cutting sales by about 440,000 – leading to an overall reduction of 120,000.

“This is one of the challenges we see,” said Hawes.

“To have a technological shift like this, you need consistent, coherent and compelling messaging and support.

“Even the announcement of a tax specifically on EVs will send a very conflicting message to consumers.”

Transport minister Keir Mather insisted government investment was “driving EV uptake, with sales up nearly 24% on the year, meaning one in four new cars sold are electric and there are nearly half a million new EVs on Britain’s roads since 2024”.

Get our flagship newsletter with all the headlines you need to start the day. Sign up here.