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The ZEV mandate, which comes into force for the UK new car market from this year, could have negative consequences for used car sales, according to analysis company Indicata UK.
Under the mandate, manufacturers must meet zero-emission vehicle sales targets, rising each year until 2030, with non-compliance potentially incurring fines.
Indicata fears that the need for manufacturers to meet the mandate - which starts at 22% of each manufacturer's sales in 2024, and progressively rises to 80% in 2030 - with sales of new EVs will place added pressure on the used market, at a time when it says demand for used EVs remains limited, with dealers choosing to stock lower priced models to protect their cashflow and avoid falling prices.
Indicata UK group sales director Jon Mitchell said: "With the UK offering tax breaks for buyers or drivers of new EVs but nothing for used EVs, there was always likely to be an imbalance between supply and demand.
"Higher-priced used EVs are already in plentiful supply at the same time as volumes of new and nearly-new cars are being pushed into the market.
"The balance of supply and demand needs careful managing for fear of compromising the used EV market which heavily influences the new car market, in particular future residual values. The used EV market could be sitting on a knife edge in the coming weeks."
Indicata said an effect of the ZEV mandate could already be seen in a 34.2% year-on-year drop in EV registrations in December 2023, which it attributed to manufacturers holding back registrations until January in order to help them comply with their 2024 target.
Mitchell said: "Too many new, nearly-new and used EVs are simultaneously in the market which could compromise prices. It needs a light touch to balance supply and demand."
According to Indicata's data, used EV stock levels have continued to rise in January. The company said its market days' supply metric - derived from dividing the currently available supply of stock by the average daily retail sales rate over the past 45 days - put EVs at 78 days, the highest level seen since March last year. This compared with 60 days and 61 days respectively for used petrol and diesel cars.
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