New car sales in the UK grew by 6.4% in the first three months of the year, compared with the same period in 2024. A substantial uptick in performance in March (+12.4%), driven by the launch of the new ‘24’ plate was enough to counter the slow start to the year, which saw sales contract in January (-2.4%) and February (-1.0%). The growth across the quarter reverses the downward trends seen at the end of 2024 where negative year-on-year performances were recorded across all three months of Q4 2024.

Faced with mounting global headwinds, the UK automotive sector will be somewhat relieved to see a continued upturn in its domestic fortunes. Indeed, the March 2025 new car sales figures alone offer a welcome boost to the sector, as well as providing a number of positive signals towards future growth. With the launch of the new plate, March is seen as the most critical month of the calendar for the car industry and an early indicator of the health of the sector for the year ahead. On average the month accounts for around 16% of total sales across the whole year and with over 357,000 new cars hitting the roads this March – the best performance since 2019 – there is optimism that 2025 will see further growth. This optimism is supported by the fact that double digit growth was achieved across both private (+14.5%) and fleet (+11.5%) markets. The growth in private demand for new cars is a particularly positive sign for the sector given that over the previous two years, growth across the sector was driven almost exclusively by fleet sales.

Another noteworthy trend across the quarter was the rapid growth of new entrants and challenger brands, especially those from foreign markets such as China. Indeed, one prominent Chinese brand saw growth of over 600% compared with the same period last year, with 9,000 vehicles registered in the first three months of the year. This growth, albeit from a low base, is indicative of the growing attractiveness of the UK market to Chinese manufacturers.

Petrol-powered vehicles remained the most popular choice for consumers, accounting for just under half (49.4%) of all new cars sold during Q1 2025. However, this figure is down by seven percentage points compared to the same period in 2024 as sales of battery electric and hybrid vehicles saw substantial growth in the first three months of 2025. A record month for Battery Electric Vehicle (BEV) sales in March, saw almost 70,000 vehicles sold as heavy discounting continued to be applied by manufacturers and dealers. As a result, BEVs now command a 20.1% share of the market, making them the second most preferred type of vehicle in the UK. 

As the industry slowly transitions towards an all-electric future, car manufacturers continue to face numerous challenges in maintaining the current growth trajectory. One such challenge is around price, with Deloitte’s recent Global Automotive Consumer Study highlighting the price premium associated with EVs as the second biggest concern among consumers. Given that the Vehicle Excise Duty Expensive Car Supplement can now apply to eligible new electric vehicles (EVs) from 1 April, concerns over price are unlikely to dissipate any time soon. 

With this in mind, it will be welcome relief for the majority of manufacturers that the government have announced plans to relax the annual mandated sales targets for EVs. According to a government statement, the ban on producing new petrol and diesel cars will still come into effect in 2030, with hybrids not phased out until 2035.  At the same time, small manufacturers will be exempt from the mandated targets, while other manufacturers will have more flexibility on how they meet annual targets and lower fines will be imposed. 

The UK government has also signalled its intentions to continue investing in the transition to electric by providing additional funding towards charging infrastructure and maintaining tax breaks for consumers. In addition, the new industrial strategy, due to be published in full in the spring, will further support manufacturers in this sector. Indeed, the government has recently made a commitment for substantial investment in the sector, with hundreds of millions of pounds earmarked for expanding semiconductor production in South Wales.   This investment aims to support the growth of a resilient and globally competitive EV supply chain in the UK.

Outlook for Q2 2025

Data from the Deloitte Consumer Tracker shows that the percentage of consumers planning to buy a new car in the quarter ahead fell from 8.5% in Q4 2024 to 7.1% in Q1 2025. This downtick is likely a result of consumers targeting March’s new ‘25’ plate to buy a car and the more optimistic observer would note that the figure still remains well above the historical average. 

Endnotes:

1. Backing British business: Prime Minister unveils plan to support carmakers - GOV.UK
2. Hundreds of millions of pounds to turbocharge manufacturing sector in Wales - GOV.UK