The UK’s auto industry is enduring its toughest year in over 70 years, with production falling 11.9% in the first half of 2025. Just 417,232 vehicles rolled off production lines, the lowest non-COVID first-half figure since 1953, according to the Society of Motor Manufacturers and Traders (SMMT). Mounting energy costs, falling export volumes, and confusion over electric vehicle (EV) incentives are straining efforts to recover.
Commercial vehicle production took the hardest hit, falling 45.4% due to factory restructuring; passenger car output also declined by 7.3%, reaching 385,810 units. However, a 6.6% increase in June offered a brief lift, though it did little to reverse earlier losses.
Amid the downturn, electric and hybrid cars are emerging as a bright spot as they now account for more than 40% of all vehicles built in the UK. With 160,107 units manufactured in the first half of the year, EV production has grown by 1.8%, showing the industry’s shift toward cleaner transport. Still, this progress faces supply roadblocks. Key components like e-axles and wiring are in short supply, local battery production is still scaling up, and there’s no established system to recycle defective or end-of-life batteries.
Exports remain vital to the UK car sector, with nearly 77% of output destined for overseas markets. Yet, outbound shipments dipped 4.3% year-on-year. Most vehicles go to the EU (54.4%) and the US (15.9%), so the recent UK-US trade agreement that cut tariffs from 27.5% to 10% has provided some relief.
Uncertainty clouds export outlook, EV support
Back home, the government’s £650 million EV grant, intended to encourage adoption, has sparked more confusion than confidence. The incentive promises up to £3,750 off new EVs under £37,000, yet no official list of qualifying models has been released. Tesla and Chinese brands have already been ruled out. With the eligible models list due just weeks before the next registration peak, car dealers and buyers are left guessing. “Right now, your local dealer can’t tell you if a car is eligible,” said Mike Hawes, CEO, SMMT.
This grant runs alongside the larger £2.5 billion DRIVE35 fund, which aims to strengthen UK manufacturing over the next decade. Early signs of progress include Nissan’s launch of a £1.4 million electric truck charging hub in Sunderland, the first of its kind in the country.
Energy costs, however, remain the biggest threat to UK competitiveness. Domestic manufacturers pay nearly double the rates of their EU counterparts; some are now shifting operations to countries like Spain and Hungary, where power is cheaper and supply chains smoother. The high cost of energy is also disrupting logistics and forcing firms to rethink their distribution strategies.
Still, industry leaders see a path forward. Hawes believes the UK can bounce back if support becomes more targeted and timely. “With rapid delivery and the right conditions, UK automotive can reverse the decline and deliver jobs, growth, and decarbonisation,” he said. The country’s skilled workforce, strong global ties, and engineering heritage remain valuable assets in the race to lead the future of mobility.
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