Rethinking EV strategy: tackling depreciation challenges, evolving mandates and hybrid shifts

As the automotive industry continues to face regulatory pressures, evolving trade dynamics and consumer uncertainty, an agile EV strategy is essential.

At FT Live’s Future of the Car event this week, our Strategy and New Growth Director, Karoline Baumann, joined a panel of experts to discuss the shifting narratives happening in the market. Here’s what she said about the latest shifts in the EV ecosystem, and what they mean for OEMs, retailers and drivers.

OEMs mustn’t slow electrification amidst new ZEV mandate regulations and emission targets

Earlier this year, Labour announced key changes to the ZEV mandate targets, following increasing concerns from the industry. As a result, UK manufacturers will experience smaller fines for every vehicle sold outside of the zero-emission targets, and a grace period until 2035 on hybrid vehicles reflecting the resurgence of (plug-In) hybrids and providing consumers with choice. However, the 2030 ban of ICE vehicles remains locked in showing that the UK are committed to an electrified future.

The European Commission has also made changes to their regulations to ease pressure. OEMs in the EU now having until 2027, rather than 2025, to comply with CO2 emissions targets for cars and vans.

So, while changes to the ZEV mandate and the EU’s CO2 emission target gives temporary relief to manufacturers and provides customers with more choice for longer, it’s vital that OEMs don’t take their foot off the pedal when it comes to their EV strategy. These developments reflect the complexities of transitioning to automotive electrification, not a lack of ambition.

OEMs have committed billions in adapting their model line ups, production lines and training staff, and the same is true for the wider industry including suppliers with the development of new sub-industries like charging infrastructure and battery maintenance. The focus now must be on maintaining momentum and continuing to invest in the technology and skills needed to meet these targets. Ultimately, the future is electric, but the path to get there will require winning over consumers with a compelling product proposition, at a price point they can afford - both of which still require work today.

Hybrids could be the bridge to automotive electrification for motorists

The UK market has observed growth in both plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs), with a 151% increase over the last four years. This translates to over 800,000 total vehicles and a 22% market share.

This trend indicates that drivers who aren’t completely sold on battery electric vehicles (BEVs), are testing the waters with hybrid options. The grace period of 2035 outlined by the government’s latest ZEV mandate update allows more time for consumers to dip their toe, while OEMs and other industry players can focus on tackling current blockers in EV adoption.

Retail value and EV depreciation: key barriers to adoption

When it comes to EV adoption, two of the biggest hesitations for drivers are: cost and residual value. Thankfully, with the introduction of new market entrants, increased model availability and manufacturer discounts, the price of electric vehicles is coming down. As it stands electric cars are just 2% more expensive on average compared to petrol models, but the monthly payments remain high. This is largely due to early-stage EV depreciation, which is keeping residual value a cause for hesitation for drivers.

Our data shown in the graph below, highlights quicker depreciation for electric vehicles in the first year, with a 68% residual value compared to 81% for petrol vehicles. There’s a light at the end of the tunnel though, with these levels beginning to align at the 3–5-year mark, suggesting a more stable resale landscape.

This strengthening of the used EV market is incredibly positive, as it’s essential for improving affordable finance options, building trust in EV ownership and driving automotive electrification forward. For OEMs and retailers, it means a more sustainable and scalable electric future, with those implementing an EV strategy that invests in the used market, finding themselves ahead of the curve.

Battery economics and their role in the EV ecosystem

Batteries are the beating heart of the EV ecosystem. They don’t just power the vehicle, but the consumer confidence in EV adoption. Yet historically, they’ve been one of the biggest cost drivers. In recent years however, battery economics have shown a huge shift.

Due to oversupply, expanded manufacturing capacity and slower-than-expected demand, lithium-ion battery pack prices dropped by 20% in 2024, hitting a record low and helping make EVs more affordable.

Cost isn’t the only hesitation when it comes to EV batteries though – buyers want better transparency on battery technology and reassurance they’re sustainable and will last. Our research shows 68% of drivers want clearer communication from OEMs and dealers on battery health, longevity, and recycling. To help drive adoption forward and reach zero-emission targets then, the industry must incorporate an EV strategy that prioritises battery education, longer warranties and better lifecycle management.

Cox Automotive’s EV Battery Solutions  plays a critical role here. In partnership with DHL, we utilise intelligent diagnostics and expert care to provide end-to-end battery support. Not only does this help OEMs prolong battery lifespan and performance, but it also reduces costs and improves sustainability in automotive electrification.

Rethinking end-of-life for EV batteries

Consumers are right to question what happens to EV batteries once they’re no longer useful, and while recycling is certainly a necessary part of that conversation, it should be the very last resort. This is because, high-voltage battery recycling is complex, costly and not the most sustainable option, particularly while in its infancy and at the scale required to support the EV ecosystem.

Instead, we should be focusing taking care of batteries from day one to extend the period from new to recycling. Through careful monitoring, preventative maintenance and intelligent second-life strategies, we can dramatically reduce the need for recycling by keeping batteries in use for longer. This approach decreases environmental impact while saving money for OEMs and consumers alike.

EV Battery Solutions is Cox Automotive’s investment into this precise model. Helping our partners extend battery health, reduce downtime, and avoid unnecessary disposal - pushing recycling further down the line, where it belongs.

If one thing is for sure, it’s that the path to automotive electrification isn’t linear, but the destination remains the same. As ZEV mandate and market pressures evolve, ensuring we get there sustainably and on time requires an EV strategy that provides regulatory clarity, price parity, consumer education and a circular EV ecosystem.

At Cox Automotive, we’re committed to making that future a reality, supporting our partners in turning the complexity of EV adoption, into tangible progress.

Want to stay ahead of shifts across the EV ecosystem? Sign up to our Insights Quarterly report to receive the latest analysis, insights and forecasts in your inbox.