EVs must make up 22% of a firm's car sales and 10% of their van sales this year. For every car sale that pushes it outside of that mandate, they must pay a £15,000 fine.
There are flexibilities in the system, allowing manufacturers who can’t meet the targets to buy "credits" from those that can.
In practice, this means buying credits from companies such as Tesla or Chinese firm BYD, which build electric models exclusively.
Manufacturers argue that demand for electric cars has not been as high as was expected when the rules were drawn up.
As a result, to avoid fines, they say they are having to discount new vehicles heavily, or subsidise rivals that build electric cars only, none of whom have a manufacturing base in the UK.
Sales of electric cars have been increasing. In October they made up nearly one out of every four cars registered. However industry sources insist this is largely down to unsustainable discounting.