From Roadblocks to Recovery: The Current Challenges and Future Growth of Britain's Automotive Industry
- Dr Bidit Dey
- Sep 12
- 7 min read
Executive Summary:
The United Kingdom boasts a rich manufacturing heritage, renowned for producing iconic automobile brands such as Aston Martin, Bentley, Jaguar, Land Rover, Mini, and Rolls-Royce. Major overseas companies, including Nissan, Toyota, Ford, and BMW, have established production facilities in the UK, contributing approximately £22 billion annually to the economy and employing around 198,000 individuals as of 2023. However, the UK vehicle production sector experienced an 11.8% decline in 2024, with output falling below one million units for the first time in years. In the first half of 2025, only 417,000 vehicles were produced, the lowest figure since 1953. This decline can be attributed to the phase-out of internal combustion engine models, the need for necessary factory upgrades for electric vehicle production, and reduced demand from key markets, such as the EU and China. The industry is undergoing a significant transformation as it adopts electric vehicles, while also navigating shifting trade relations and intensified foreign competition. The future of the British automotive sector is increasingly influenced by a marked shift towards electrification, digitalization, and sustainability. This article examines the current challenges facing the UK automotive industry. It provides a brief overview of potential pathways for recovery, aiming to maintain competitiveness in both local and international markets.
1.0 Introduction
The United Kingdom proudly showcases a rich heritage of manufacturing, renowned for producing some of the most iconic automobile brands. Names like Aston Martin, Bentley, Jaguar, Land Rover, McLaren, Mini, and Rolls-Royce evoke images of elegance and power. In addition to these prestigious marques, the UK is home to exceptional manufacturers such as Morgan, with its artisanal craftsmanship, and Lotus, celebrated for its innovative engineering. The nation also serves as a base for manufacturing facilities of various European, Asian, and North American brands, with companies such as Nissan, Toyota, Ford, and BMW establishing a presence in the country. The automotive landscape of the United Kingdom underscores the country's historical significance within the industry, as well as its reliance on this sector for job creation, economic growth, and a sense of national pride. The automotive industry contributes approximately £22 billion annually to the UK economy, and as of 2023, it employed around 198,000 individuals within the country.
The latest findings from the Society of Motor Manufacturers and Traders (SMMT) present a concerningly volatile outlook for the UK car manufacturing sector in 2025. This period is characterized by erratic production rates and significant challenges stemming from global trade disruptions. In total, merely 417,000 new cars and vans were produced in the UK during the first half of 2025, marking the lowest output since 1953. The yearly total is expected to be around 755,000, which is even less than what was achieved during the pandemic period.
As one of the key sectors of the UK economy, the car industry finds itself at a crossroads, navigating a profound transformation fueled by the rapid shift toward electric vehicles (EVs). Compounding these challenges are the unpredictable currents of international trade and the growing dominance of foreign-owned companies in the production arena.
This article examines the current challenges and the future trajectory of the sector.
2.0 Historical background
The automotive industry in the UK began in the late 1800s, laying the groundwork for domestic vehicle manufacturing by pioneers such as Daimler and Napier. By the dawn of the 20th century, brands such as Rolls-Royce and Morris Motors were producing cars that gained international recognition for their quality and engineering superiority. The interwar period saw substantial growth as mass production techniques were adopted, positioning the industry as a vital contributor to the economy.
Following World War II, the UK experienced a significant boom in manufacturing, with companies like Austin, Jaguar, and the British Motor Corporation (BMC) leading the way. The launch of the Mini in 1959 marked an innovative design breakthrough, and by the 1960s, Britain had established itself as one of the world's largest car exporters. However, the 1970s and 1980s brought challenges, characterized by poor labor relations, outdated production facilities, and increasing competition from more efficient Japanese and European manufacturers. British Leyland, formed through a series of mergers, struggled considerably and was eventually nationalized.
In the 1990s and beyond, foreign investments revitalized the automotive industry in the UK. Prominent Japanese firms, such as Nissan and Toyota, established production facilities in the country, while international corporations acquired notable British brands. BMW purchased Mini, Tata Motors took over Jaguar Land Rover, and Volkswagen acquired Bentley.
Production was severely impacted by the 2008 financial crisis, the COVID-19 pandemic, and subsequent supply chain issues. After a recovery period, production started to decline in 2017 and 2018. It saw a brief annual increase in 2023 but has since been hit by further disruptions. The sector faces challenges stemming from Brexit, changes in global supply chains, and the transition towards sustainable transportation.
3.0 Current statistics and trends (2025)
The UK automotive industry currently generates £93 billion and employs 813,000 individuals across automotive manufacturing plants and support industries. The sector also makes a significant contribution to exports, with 78.2% of vehicles produced in July 2025 being exported abroad. The EU continues to be the primary export market, accounting for 54.4% of exports in the first half of 2025. In addition, vehicles are exported to the US and China.
As noted, UK car production has experienced fluctuations in recent times. In July 2025, the total production reached 69,127 units, marking a 5.6% increase compared to July 2024. This production rise in July followed significant declines in May and June. However, during the first seven months of 2025, overall vehicle production saw an 11.7% year-on-year decrease, highlighting the sector's erratic nature. Both domestic sales and exports have declined this year compared to last year. Domestic market sales are down by nearly 13%, while export figures have decreased by 3.1%.
Despite the overall decline in sales and exports, the UK's exports to the US market have seen an increase following the adjustment of the US tariff. This 6.8% rise comes after three consecutive months of falling sales. Initially, the US government imposed a 27.5% tariff on British-made cars; however, in May, this was reduced to 10%, leading to a boost in export figures in the subsequent months. The US remains the largest national market for UK exports, and this tariff reduction has proven critical for the continued success and growth of the industry.
4.0 Factors influencing the sector
The fluctuation in UK automotive sales and production in recent times can be attributed to a complex mix of regulatory, economic, and structural factors. In 2024, new car registrations initially showed growth but declined in the final quarter due to tightening regulations, rising costs, and shifting consumer preferences[i]. The Zero Emissions Vehicle (ZEV) Mandate set forth specific sales targets for electric vehicles (EVs), creating a dynamic environment for manufacturers. Although there was a marked increase in the sales of battery electric vehicles (BEVs), they did not fully meet the established goals, leading manufacturers to explore strategic discounts and adapt their product lines accordingly. While retail sales faced some challenges, as indicated by a slight decline, fleet sales showed relative stability, although profitability in this segment has experienced some pressures.
Furthermore, there are other factors, including the intentional phase-out of legacy internal combustion engine (ICE) models and a reduction in demand from key export markets, particularly within the European Union and China. While there was modest growth in the production of commercial vehicles, the car manufacturing segment encountered significant challenges, especially in the latter part of 2024. Although the transition toward electrification is a vital and forward-looking strategy, it has led to some temporary adjustments as manufacturers work to realign their operations and supply chains with emerging technologies.
In 2025, the situation remained unstable. Sales in the second quarter showed mixed results, with a sharp decline in April followed by modest recoveries in May and June. Despite the US tariff, other factors also contributed to this trend. For instance, consumers are speeding up their purchases in anticipation of upcoming changes to the Vehicle Excise Duty (VED). At the same time, the aggressive discounting strategies used to boost interest in electric vehicles (EVs), which have reached an astonishing £6.5 billion over the past 18 months, are proving to be a new challenge. While these discounts may temporarily boost sales, their long-term sustainability is at risk, potentially threatening vital investments in research and development, as well as the infrastructure needed to support the EV market. Additionally, a subtle but noticeable decline in consumer confidence has appeared, reflecting the broader economic uncertainty. There are also worries about affordability, especially since electric vehicles still carry a high price, making many potential buyers hesitant in this changing automotive landscape.
5.0 Future of the sector
Amidst a variety of challenges, there are encouraging developments emerging within the automotive sector. The government's initiatives, notably the £650 million Electric Car Grant and a forward-looking industrial strategy, aim to support the transition to electric vehicles (EVs) while bolstering domestic production capabilities. The future of the British automotive industry is increasingly being influenced by a significant movement towards electrification, digitalization, and sustainability.
With the UK government's commitment to phasing out the sale of new petrol and diesel vehicles by 2035, manufacturers are proactively advancing their transition to electric vehicles. This includes substantial investments in battery technology, smart manufacturing practices, and the development of green infrastructure. To further reinforce the UK automotive industry, the government has introduced a robust set of policies under its Modern Industrial Strategy, emphasizing electrification, innovation, and global competitiveness. A key element of this strategy is the Automotive Sector Deal, which fosters collaboration through joint investments exceeding £250 million from both the government and industry to advance electric vehicle and battery technology development[ii].
Companies like Jaguar Land Rover, Rolls-Royce, and Nissan are modernizing their facilities and retooling their production lines to align with these objectives. Additionally, Chinese EV brands, including BYD and MG, are entering the UK market with competitive offerings.
At the same time, the increasing demand for skilled professionals in areas such as battery systems, embedded software, and sustainable engineering is fostering collaboration between universities, technology hubs, and industry leaders. As emerging markets like China and India continue to reshape global dynamics, UK manufacturers must adapt by forming strategic partnerships, engaging in trade negotiations, and investing in next-generation technologies. The path forward may be complex, but it is brimming with opportunities for those willing to innovate and evolve.
Dr Bidit L. Dey
Professor of Marketing
Northumbria University, UK
LinkedIn: Bidit Dey | LinkedIn
[i] https://www.ey.com/en_uk/newsroom/2025/01/opportunities-and-challenges-for-uk-automotive-in-2025
