New car sales in the UK remained flat (+0.11%) in Q2 2025, compared with the same period in 2024. A substantial decline in April (-10.4%) was offset by a 1.6% and 6.7% uptick in sales in May and June, respectively. When combined with the 6.4% growth in sales recorded across Q1 2025, the industry completed the first half of the year 3.5% ahead of the same period last year.

If Q2’s sales performance is broken down month by month, it presents a mixed picture about the health of the sector, with some ongoing structural challenges evident. April 2025’s poor performance can be attributed to a number of factors, including economic conditions and consumer sentiment. However, it is also true that some consumers brought sales forward into March 2025 ahead of the implementation of VED (Vehicle Excise Duty) changes affecting all new cars on 1 April. For those observers looking for green shoots, the performance in May and June could be seen as a signal of healthy demand within the sector. Indeed, the number of new vehicles registered in June – 191,000 – was the highest number for that month since 2019. However, the more pessimistic observer would be justified in pointing towards the growth being underpinned by fleet sales and ongoing discounting of electric vehicles, which is likely to be unsustainable in the long run.

Petrol-powered vehicles remained the most popular choice for consumers, accounting for just under half (48.4%) of all new cars sold during the first six months of 2025. However, this figure is down by seven percentage points compared with the same period in 2024 as sales of both battery electric and hybrid vehicles saw substantial growth in the first half of the year. In June, BEVs accounted for one in four of all new cars sold and as a result, BEVs commanded a 21.6% share of the market across H1 2025, making them the second most preferred type of vehicle in the UK.

Despite the ongoing growth of BEVs in the UK market, they remain well below the mandated figure of 28% for 2025. Although changes to the ZEV mandate mean that OEMs (Original Equipment Manufacturers) will have more flexibility in meeting this target, there will be concern within the public sector about the speed of the transition to an all-electric future. In addition, there is a sense that the current market share figures could present a slightly false picture of consumer preferences, with the SMMT claiming that BEVs have received discounts from OEMs and dealers totalling £6.5 billion over the last 18 months. Clearly, this level of discounting cannot be sustained without compromising on other capital expenditure. Given the requirement for R&D, innovation and other capex decisions within the automotive industry, this level of discounting appears unsustainable.

Deloitte’s recent Global Automotive Consumer Study highlighted the price premium associated with EVs as the second biggest concern among consumers. Given that the Vehicle Excise Duty Expensive Car Supplement now applies to eligible new electric vehicles (EVs), and if current levels of discounting are no longer available, concerns over price are likely to become even more prominent. With this in mind, the new Electric Car Grant, announced in June, will be welcomed by consumers. The grant, worth £650 million, will support the transition to EVs by providing discounts of up to £3,750 on new eligible electric cars priced at or under £37,000.

Automotive manufacturing in the spotlight

Shifting our focus from new car sales to production, figures in the first half of 2025 are indicative of the global challenges that OEMs face. For example, in May 2025, new car and commercial vehicle production volumes fell by -32.8% year on year. According to the SMMT, this was the lowest performance for the month since 1949, excluding 2020, when COVID lockdowns saw factories shuttered or running at greatly reduced capacity.¹ Although some of this decline can be attributed to planned transitions in vehicle production lines, it is clear that a decline in exports to the EU and US have played a substantial role in this decline.

Amid ongoing global trade challenges, the industry has welcomed key UK government announcements on investment and international trade deals that aim to boost growth and increase global competitiveness. Indeed, the announcement of trade deals with the US, EU and India should help boost demand for vehicles manufactured in the UK.

At the same time, the UK’s industrial strategy, published at the end of June, offers a substantial financial plan aimed at revitalising the UK manufacturing sector. The industrial strategy includes the ambition to increase the volume of vehicles made in the UK to over 1.3 million cars and commercial vehicles by 2035. This represents an increase of around 400,000 vehicles when compared with full-year production figures from 2024.² The automotive sector will benefit from the industrial strategy’s planned investment in new battery giga-factories and semiconductor production, as well as multi-billion-pound investments in R&D and skills and workforce development, a focus on regulatory reform, energy cost reduction and international partnerships.

Outlook for Q3 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 7.1% in Q1 2025 to 6.7% in Q2 2025. This small downtick reflects the downturn in consumer confidence seen in Q2 2025, with many consumers unsure of their ability to complete major purchases at this time. Despite some strong underlying economic conditions there will be justifiable concern that the second half of 2025 may struggle to maintain the momentum created in the first six months.

Endnotes:

1. UK vehicle production constraints continue in May - SMMT
2. Vehicle production dips amid EV transformation and intense market pressure - SMMT