New car registrations return to growth in record month for Battery Electric vehicles – EY comments

David Borland, EY UK & Ireland Automotive Leader, comments on the Society of Motor Manufacturers and Traders (SMMT) new car registration figures for March 2025:

“The introduction of US trade tariffs this week has taken us closer to a scenario where businesses may face up to $1trn in new global tariffs.

“As the global automotive industry assesses and responds to the US tariff changes, the UK automotive sector returned to growth in the most important month of the year with over 357,000 registrations resulting in a 12.4% year-on-year uplift. 

“Declining demand for Internal Combustion Engine (ICE) vehicles continues, with both petrol and diesel sales down once again in March, -0.4% and -10.1% respectively. In contrast, the UK continues to make progress in the transition towards cleaner and greener vehicles with Battery Electric Vehicles (BEV) recording the best ever month of sales in the UK, rising by a substantial 43.2% year-on-year. However, despite this, the BEV market share of 19.4% continues to lag the 28% Zero Emissions Vehicle (ZEV) Mandate target, which currently remains under review. 

The impact of tariffs

“The UK automotive sector has shown incredible resilience in the last decade despite facing a variety of headwinds. However, the impact of tariffs and higher employment costs from this April – on top of an already challenging growth and economic environment – is going to challenge many companies to the limit. 

“A 25% duty applies to all cars assembled outside the US, extending to car parts from 3rd May. Of the nearly 780,000 cars produced in the UK in 2024, eight in 10 were exported, with around 17% going to the US, making it the UK’s second-largest market. According to the IPPR, approximately 25,000 UK automotive jobs – about 10% of the total – rely on US car exports. 

“So far, the impact is being managed by a combination of manufacturers absorbing costs, the supply chain sharing the burden and passing costs to the end consumers. It remains to be seen if this is sustainable, and the sector faces tough decisions if these tariffs stick.”

Challenges persist for retail and fleet sales

Edwin Kemp, Director, EY-Parthenon Strategy, said:

“Much of last year’s growth in new car registrations was driven by a consistent upward trajectory of fleet sales, whilst there were marked challenges for private retail demand. However, the most recent data showed growth across both sales types.

“In March, contrary to recent historical trends, retail sales saw a significant year-on-year increase of 14.5%, with fleet sales also seeing strong year-on-year growth of 11.5%. The real question is whether this marks the beginning of a more sustained positive trajectory, or just a one-off, particularly given the ongoing market headwinds for new car registrations.

“On the powertrain transition, whilst March 2025 was the strongest month ever for BEV uptake, the complex combination of affordability challenges, infrastructure gaps, battery degradation and regulatory hurdles continue to keep BEV market share below the government’s ZEV Mandate targets.

“Unlocking growth in BEV sales will be critical for the industry going forward, as manufacturers pursue regulatory compliance, and the UK continues to ramp up its net zero efforts. Incentivising both consumers and businesses to purchase EVs in the near term will be pivotal, but this is easier said than done given the complex landscape and persistent consumer sentiment concerns.” 

The road ahead

“Developing a long-term strategy that delivers sustainable profitability is becoming increasingly challenging as manufacturers, suppliers and dealers address the impact of trade, geopolitics, regulation, penalties, incentives, consumer demand, product portfolio, footprint strategy and skills. The destination will continue to evolve but the journey will have many twists and turns.”