Despite record EV sales and billions in investment, UK automotive faces intensifying global competition, trade risks, and regulatory hurdles. As political and economic shifts unfold, the sector must secure its position despite volatility. AL attends SMMT’s annual press briefing to bring you the latest.
The UK’s automotive industry entered 2025 grappling with a shifting economic and regulatory landscape. At the Society of Motor Manufacturers and Traders (SMMT) annual press briefing, Chief Executive Mike Hawes outlined key trends affecting exports, investment, and production. While EV sales hit record levels, trade barriers, economic uncertainty, and intense global competition for investment continue to cloud the industry’s outlook.
”The challenge now is meeting the government’s Zero Emission Vehicle (ZEV) mandate, which requires EV sales to rise from 22% to 28% in 2025—a 45% increase over the previous year”
- Mike Hawes, Chief Executive, SMMT
Exports and production: a fragile recovery
The UK’s new car market expanded by 2.6% in 2024, but sales remained below pre-pandemic levels. “Consumer confidence is essential to encouraging vehicle purchases, but these are often discretionary,” Hawes noted, emphasising that economic growth policies recently introduced by the government could help bolster demand.
The UK remains heavily reliant on exports, with 77.4% of vehicles produced going overseas. However, shifting global demand patterns have reshaped traditional trade flows. While exports to the European Union—the UK’s largest market—declined by 24%, shipments to the US surged 16.9% to just over 102,000 units. Exports to China fell sharply, down 21.8% to just over 40,000 vehicles. Other key destinations included Turkey, Japan, Australia, Canada, South Korea, and the UAE.
Despite a strong export focus, the UK’s automotive sector faces intensifying competition from other manufacturing hubs. Global demand remains fragile, particularly in Europe, and maintaining competitiveness will require continued investment and strategic trade partnerships.
Investment and industrial strategy: the battle for capital
Investment in UK automotive remains strong but volatile. After a record £20 billion ($24.87 billion) was committed in 2023, largely for EV production and gigafactories, 2024 saw a more modest £3.5 billion ($4.35 billion). Early 2025 has already brought fresh announcements, including £300 million ($373 million) from Rolls-Royce and £50 million ($62.2 million) for Nissan’s project in the Northeast.
”The US has approached tariffs on a market-by-market basis rather than imposing blanket measures, suggesting that exemptions could potentially be negotiated”
- Mike Hawes, Chief Executive, SMMT
However, the global race for automotive investment is intensifying. The US and EU have aggressively pursued subsidies and incentives to attract battery manufacturing and EV production, making the UK’s position more precarious.
“Ensuring the UK maintains favourable conditions for investment will be critical in securing its long-term competitiveness,” Hawes stressed.
For the UK to remain an attractive destination, policymakers must address structural challenges, including skills shortages, infrastructure gaps, and high energy costs.
Advanced manufacturing, a central pillar of the government’s growth strategy, will only deliver results if backed by a coherent industrial policy.
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Electrification: an unsustainable discounting model
The UK ended 2024 as Europe’s largest battery electric vehicle (BEV) market, with BEVs accounting for 19.6% of new car sales. While this marked a record high, much of the growth was fuelled by substantial industry-led discounting, totalling over £4.5 billion ($5.6 billion). “This level of financial support is unsustainable,” Hawes warned.
The challenge now is meeting the government’s Zero Emission Vehicle (ZEV) mandate, which requires EV sales to rise from 22% to 28% in 2025—a 45% increase over the previous year. Without stronger incentives, particularly for private buyers, achieving these targets will prove difficult. Consumer adoption remains uneven, with fleet and corporate purchases driving much of the growth, while private buyers remain hesitant due to high upfront costs and inadequate charging infrastructure.
Trade risks: US protectionism and tariff concerns
With Donald Trump now back in office, UK automotive manufacturers are closely watching developments in US trade policy. While initial announcements have focused on Mexico and Canada, attention could soon turn to other markets, including the UK.
The US remains a key export destination, particularly for British luxury and performance brands such as Rolls-Royce, Aston Martin, and McLaren. These manufacturers occupy a unique segment with limited direct competition, but new tariffs could disrupt demand.
“The US has approached tariffs on a market-by-market basis rather than imposing blanket measures, suggesting that exemptions could potentially be negotiated,” Hawes observed.
Trade restrictions would not only hurt UK exports but also contribute to inflationary pressures in the US. With price sensitivity affecting even high-net-worth buyers, any rise in import costs could dampen demand. As negotiations unfold, securing favourable terms will be crucial for the UK’s automotive sector.
”Although 2025 production forecasts are lower due to model cycle changes and strategic shifts, UK manufacturers continue to focus on high-value, premium exports”
UK-India relations: an untapped opportunity
Amid trade tensions with traditional partners, SMMT has been seeking to strengthen ties with India. Hawes highlighted a recent visit aimed at supporting UK automotive firms looking to expand in the Indian market. While formal trade negotiations remain stalled, India’s growing automotive sector presents opportunities for collaboration.
For UK manufacturers, expanding trade beyond Europe and North America will be critical to diversifying risk and capturing new growth markets. While challenges remain, particularly around regulatory alignment and tariffs, India could emerge as an important long-term partner for the UK’s automotive industry.
A resilient industry amid uncertainty
Despite the headwinds, Hawes remained optimistic about the industry’s long-term prospects. Although 2025 production forecasts are lower due to model cycle changes and strategic shifts, UK manufacturers continue to focus on high-value, premium exports. While export volumes fell in 2024, the overall value of shipments increased, underscoring the sector’s strength in luxury and high-performance manufacturing.
“The industry will continue working closely with the government to refine policies, maintain competitiveness, and drive sustainable growth,” Hawes concluded. With investment, regulation, and trade policy all in flux, UK automotive finds itself navigating an increasingly uncertain future.
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