#London #United Kingdom #SMMT #UK Automotive #vehicle production

The Decline and Future Prospects of the UK Automotive Industry

The Society of Motor Manufacturers and Traders (SMMT) has recently reported a dramatic 15.5% decrease in vehicle production within the UK for the year 2025. The statistics indicated that 764,715 vehicles left the production lines, comprising 717,371 cars and 47,344 commercial vehicles. This decline was aided by significant drops in the output of cars by 8.0% and commercial vehicles by an alarming 62.3%. Various factors contributed to these dismal numbers, including a damaging cyber incident, new tariffs affecting transatlantic trade, and production consolidation due to ongoing restructuring towards a carbon-neutral future.

The industry found some consolation in a slight resurgence for December's production figures, with car outputs increasing by 17.7% to 53,003 units, ending a month-long downward trend. However, overall production still faced a 8.2% decline in vehicles intended for the UK market, dropping to 161,545 units. Furthermore, vehicle exports fell by 7.9% to 555,826 units, which accounted for 77.5% of the total production.

Export Dynamics

European markets remain the most significant for UK automotive exports, accounting for 56.7%, followed by the USA at 15.0% and China with 6.3%. However, these figures do not paint a completely rosy picture, as the US market saw export declines attributed to ongoing tariff uncertainties and changing trade rules post-Brexit. The leading five markets for UK automotive exports—Turkey, Japan, Canada, Australia, and more—merged into one challenging landscape for the industry.

In terms of electric vehicle production, the battery electric vehicles (BEV), plug-in hybrids (PHEV), and hybrids (HEV) sectors saw an uptick, with overall production escalating by 8.3%, which constituted a record 41.7% share of the total automotive output. With the expected production launch of several new next-generation electric vehicle models, analysts suggest a rebound is possible for 2026.

Looking Ahead: A Strategy for Recovery

Independent projections indicate a potential growth trajectory for the UK automotive industry, with expectations of over a 10% production increase, soaring to roughly 790,000 units by 2026 if market conditions align. The Light Vehicles production could even reach 824,000 units, with aspirations for a million units by 2027 provided the right conditions and models are introduced successfully. The UK government has laid the groundwork with its £4 billion DRIVE35 program, which supports the transition towards electric vehicles, making significant public and private investments.

Achieving the goal of elevating UK automotive production beyond 1.3 million vehicles annually by 2035 hinges on adherence to a strict industrial strategy. This includes stabilizing energy costs, ensuring sector-wide eligibility for competitiveness programs, enhancing UK supply chain support, and cultivating a robust domestic market.

Given that manufacturers tend to produce where they sell, the health of the domestic vehicle market is essential. A proactive trade agenda facilitating deeper existing relationships while creating new ones is crucial for the export-focused capabilities of the industry.

Mike Hawes, Chief Executive of SMMT, remarked, “2025 was the toughest year for British automotive manufacturing in a generation.” The ongoing challenges from structural shifts, trade barriers, and cybersecurity threats have undoubtedly strained production rates. Nevertheless, the encouraging sign of new electrified model launches and improving economic conditions suggest a path to recovery.

The outcomes of these strategies and a focus on stabilizing export markets will be vital for revitalizing the UK automotive sector in the coming years. Оnly through fostering competitive investment conditions, reducing energy costs, and navigating trade barriers can the industry hope to thrive again in what has become a critically important market sector for the UK economy.