#Manufacturing #London #United Kingdom #electric vehicles #UK Automotive

The Struggles of the UK Automotive Sector in 2025

The UK automotive industry experienced one of its toughest years on record in 2025, with production plummeting by 15.5%. According to the Society of Motor Manufacturers and Traders (SMMT), the country produced 764,715 vehicles, which included 717,371 cars and 47,344 commercial vehicles. This significant downturn came alongside a drop in car output of 8.0% and a staggering 62.3% decline in commercial vehicle volumes as the sector grappled with a multitude of challenges.

Factors Behind the Decline

Several factors contributed to this steep falloff in production. A severe cyber incident impacted operations at the UK’s largest automotive employer, disrupting normal manufacturing processes. Furthermore, new tariffs introduced on transatlantic trade strained exporters and added pressure to manufacturers already facing rising costs. Consolidation efforts to merge two commercial vehicle plants into one, along with ongoing structural adjustments to embrace a decarbonized agenda, further constrained output.

Despite these obstacles, December 2025 did show a glimmer of hope, particularly in the car production sector, which rebounded slightly with growth of 17.7% compared to previous months. This rise brought December's car output to 53,003 units, cutting through a four-month stint of drops. While total UK market production for cars fell by 8.2% to 161,545 units, total exports decreased by 7.9%, amounting to 555,826 units. Notably, exports still represented a significant 77.5% of all production output.

Future Outlook: Signs of Recovery

The SMMT reports optimistic projections for 2026, bolstered by the anticipated introduction of new electric vehicle (EV) models. Battery electric vehicles (BEV), plug-in hybrids (PHEV), and hybrid electric vehicles (HEV) comprised a record 41.7% of total production, with an overall increase in these categories of 8.3%, summing to 298,813 units.

Looking ahead, an independent outlook suggests that vehicle manufacturing in the UK could witness a recovery, potentially increasing production by over 10% to approximately 790,000 units in 2026. This includes expectations for overall light vehicle production to attain 824,000 units, with an ambitious target of reaching one million units by 2027, contingent on favorable market conditions and successful launches of new models.

The Role of Government Strategy

However, achieving these optimistic projections hinges on vital industrial and trade strategies laid out by the government. The UK’s £4 billion DRIVE35 program, aimed at fostering electric vehicle transition, must evolve into tangible support for the sector to realize its potential of producing over 1.3 million vehicles annually by 2035. Fundamental components of this strategy include lowering high energy costs, ensuring eligibility for the British Industrial Competitiveness Scheme, and fortifying the domestic supply chain while cultivating a thriving internal market for vehicles.

Trade agreements also play a critical role, particularly with Europe, which remains the UK’s primary automotive export market. The assurance of tariff-free trade under new conditions post-Brexit becomes vital in mitigating additional trade barriers that could inhibit recovery efforts. Additionally, fostering strong relationships with countries like South Korea and India is crucial.

Conclusion

In the words of Mike Hawes, SMMT Chief Executive, “2025 was the toughest year in a generation for UK vehicle manufacturing.” Nevertheless, by aligning governmental strategies with industry insights and ongoing technological advancements, 2026 may mark a significant turnaround for the beleaguered sector. With the right investment climate and a sustained recovery effort, the UK automotive industry is poised for a promising resurgence, led by innovation in electric vehicle production and strengthened trade partnerships.