Challenging start to the year for UK automotive, with complex road ahead – EY comments

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

“After persistently declining across the final few months of 2024, new car registrations were down once again in January, with a 2.5% year-on-year fall.

“Battery Electric Vehicles (BEVs) were the only powertrain to see double-digit growth, with a 41.6% year-on-year rise. Despite this growth, BEV market share stood at 21.3% last month, a significant margin behind the 28% Zero Emissions Vehicle (ZEV) Mandate target for 2025. Meanwhile, Plug-in Hybrid Electric Vehicles (PHEVs) saw modest growth of 5.5%, while Hybrids were up by 2.9%, as interest in alternative powertrain technologies continued to rise. There is no doubt another dynamic year lies ahead with the outcome of the ongoing consultation around phasing out petrol and diesel cars and support for the zero emission transition looming.

“Continuing the trend seen in 2024, Internal Combustion Engine (ICE) vehicles saw sales figures decline again last month, but their combined share increased from 47% in December to 56% in January. This was likely a result of the tactical move of manufacturers limiting petrol and diesel sales deliberately towards the end of last year in a bid to manage their ZEV Mandate compliance.

“Exacerbating the scale of the challenge ahead for manufacturers, the expensive car supplement is set to come into effect in the coming months, presenting an additional tax liability for those who buy vehicles above a value of £40,000. Given many BEVs remain relatively expensive to buy, this could in turn further de-incentivise many consumers from making the switch to a BEV. Indeed, a reconsideration around the scale of this year’s ZEV Mandate target, and a rethink of how upcoming additional vehicle excise duty impacts BEV tax implications would be a welcome step forward for the UK’s automotive sector.

“As always, it is important to recognise the UK is part of a tightly knit global automotive industry, which continues to see significant pressures from regulation and trade in the other markets, which could have a knock-on impact to UK automotive.”