Production collapsing, but recovery maybe around the corner

UK car production remains export-focused, with 76.9% of output headed overseas year-to-date and greater certainty now returning to key markets. The EU remains the main destination for UK car exports (54.4% share), followed by the US (15.9%) China (7.5%), Turkey (4.1%) and Japan (2.7%), with these five destinations alone accounting for more than eight in 10 overseas sales.

Despite three straight months of declining export volumes culminating in an -18.7% drop in June, the US maintained its position as the UK’s biggest single export market underscoring the importance of the UK-US trade deal, which came into force on 30 June, giving the UK reduced tariff rates into the US automotive market, which can become a basis for future growth.

With the global economy continuing to be buffeted by economic and trade uncertainty, the latest independent production outlook anticipates total 2025 vehicle output will fall by -15% to 755,000 units in 2025, but an expected 6.4% increase next year would take total production to 803,000 units.

Rapid implementation of the new Industrial Strategy, however, with wider measures to reduce energy costs, accelerate infrastructure, and address skills gaps, could restore the UK’s competitive edge, returning Britain to a top 15 global auto manufacturing location and providing an additional £50 billion economic windfall. The government’s automotive sector strategy, DRIVE35, also sets out a package of measures which will support the sector and its economic and environmental ambitions. Furthermore, with the announcement of the Electric Car Grant, which provides £650 million of fiscal incentives for EVs, there is the potential to energise the domestic market that underpins the UK’s attractiveness as an industrial investment opportunity.

With a strong 7.3% year-on-year (YOY) decline for June, also indicative of the challenging global economic environment for auto makers. The battery-electric car market share for H1 2025 stood at 15.6%, still far from where it needs to be at this point in the transition.

Hybrid-electric models continue to grow in popularity, retaining their place as the most popular power type amongst buyers.

Up until June 2025, battery-electric cars accounted for 15.6% of the EU market share, an increase from the low baseline of 12.5% in H1 2024.

Hybrid-electric car registrations continue to surge, capturing 34.8% of the market, remaining the preferred choice among EU consumers. Meanwhile, the combined market share of petrol and diesel cars fell to 37.8%, down from 48.2% over the same period in 2024.