Industrial Strategy and EV sales growth are reasons for optimism as new car registrations increase

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

“After seeing consistent growth last year, 2025 has reflected a more volatile environment and economy with both upside and downside movements. After May saw a modest increase in sales following a 10% reduction in April, June saw a return to stronger growth with a year-on-year increase of 6.7%. This marked the best June performance since 2019.

“The trend for Battery Electric Vehicles (BEVs) continues with significant and stable growth, with sales increasing to 47,354 units, representing a significant 39.1% year-on-year uptick. Furthermore, the UK’s new Industrial Strategy aims to secure the industry's long-term future by funding research and development, as well as supporting the wider Electric Vehicle (EV) supply chain, which could be a critical source of support for UK auto companies going forward.

“Petrol cars saw a year-on-year decline once again last month with a 4.2% fall in registrations whilst diesel sales were broadly flat. Meanwhile, despite the climb for BEV sales, the UK’s BEV market share across this year to date now stands at 21.6%, which remains significantly below the 28% Zero Emissions Vehicle (ZEV) Mandate target. New flexibilities in the ZEV Mandate legislation will soften the impact and concern caused by this, but it remains a critical challenge for UK automotive nonetheless. 

“Plug-in Hybrid Electric Vehicles (PHEVs) saw growth once again last month as they continue to compel buyers looking for alternative powertrain technologies which aren’t fully reliant on battery power, with 28.8% growth, while Hybrids saw an 8.5% year-on-year decline.”

UK automotive must rise to the challenge of new entrants and evolving consumer preferences

Maria Bengtsson, EY UK & Ireland Mobility Leader, added: “With retail sales being the more profitable channel for automakers, convincing consumers to make purchases is critical given the challenging economic and global trade landscape. Therefore, automakers should prioritise innovation in the design of their vehicles, as modern consumers are increasingly drawn to advanced in-car technologies. Retail sales have now seen growth in two of the last three months, which is positive news after a period of consistent decline.

“From a regulatory perspective, BEV sales are continuing to grow in importance, so the Government’s pledge to support the EV transition will be crucial, but speed to market, a diverse product offering and production costs remain key challenges for manufacturers. The scale of this challenge is emphasised by the competition brought to the market by new entrants, including Chinese manufacturers, who are often able to offer more compelling price propositions than their UK and European counterparts.  The market share held by Chinese manufacturers in the UK and Europe currently remains low, but it is growing, so it is critical that UK automakers combine their manufacturing heritage and trusted processes and techniques with modern innovation to maximise their competitiveness in the market and keep pace with both legacy and new peers. 

“Fleet sales, which were a consistent source of support to the UK automotive sector last year, have encountered challenges this year. However, June saw an 8.5% year-on-year rise in fleet sales. Improving charging infrastructure, and the chance for businesses to optimise cost efficiencies for their fleets through technologies such as Vehicle to Grid (V2G) charging could hold the key to unlocking more consistent and buoyant growth in fleet sales going forward.”