UK automotive industry facing marked challenges as new car registrations fall again – EY comments

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

“Continuing the downward trend seen in recent months, UK new car registrations fell again in February, with a 1% year-on-year decline. This mirrors many of the major auto markets globally and is a result of the many headwinds the industry is facing, including economic uncertainty, complex and evolving trade policies and regulations, and restructuring needs.

“Demand for Internal Combustion Engine (ICE) vehicles continues to decline as the UK pursues the transition towards cleaner and greener transport, with both petrol (-17.3%) and diesel (-15.1%) registrations falling last month.

“On a positive note, Battery Electric Vehicle (BEV) registrations continued their upward trajectory, with a significant 41.7% year-on-year increase, taking market share to just over one quarter for February (25.3%). Meanwhile, Plug-in Hybrid Electric Vehicles (PHEVs) saw growth of 19.3%, with Hybrids up by 7.9%. 

“Year-to-date BEV market share is now 22.8%, continuing to trail a significant way behind the 28% ZEV Mandate target for 2025. Manufacturers will be eagerly awaiting the outcome of the ongoing consultation on ZEV legislation, given the significant financial penalties that could apply as they balance their individual targets with the flexibilities available.

“In Europe, new CO2 emissions levels are in effect in 2025, but as part of the Strategic Dialogue with European manufacturers, the European Commission president has announced that manufacturers will be given an extra two years to meet the targets. Compliance will now be based on a carmaker's average emissions over the period 2025-2027. This still requires approval, and manufacturers are reporting differing views due to the investments they have made in new products.”

Forward look

Ali Fitt, EY UK Automotive Tax Director, said: “Given the complex combination of challenges facing the UK automotive industry, including consumer hesitance around wider scale EV uptake, regulatory challenges and infrastructure shortfalls, the road ahead will undoubtedly be tricky to navigate. Meanwhile, the complex and disruptive global landscape, recently heightened by the introduction of US Tariffs, adds another layer of complexity for the sector. 

“From a regulatory perspective, any changes to the ZEV Mandate should take the UK automotive industry’s attractiveness to investors into careful consideration, particularly given a number of major manufacturers have expressed concerns around the longer-term viability of operating in the UK market under current rules and regulations. The upcoming Spring Statement at the end of this month represents an opportunity for the government to provide some much needed reassurance to the sector.   

“However, incentives will also continue to be pivotal if the UK’s EV transition is to accelerate in line with ambitions. Indeed, policymakers should prioritise collaborating with manufacturers, suppliers and dealers to assess how more consumers can be encouraged to purchase an EV. For example, how can consumer concerns around expensive upfront purchase costs, battery degradation, residual values and infrastructure limitations be alleviated through smart incentives?

“The answers and solutions to these challenges, while difficult to obtain, will likely hold the key to unlocking faster and more stable supply and demand in the UK going forward, and thus faster and more significant EV uptake, increasing the chances of a return to growth in new car registrations.”