The British automotive industry has endured its most challenging year in decades, with vehicle production plummeting by 15.5% in 2025. A combination of high-profile setbacks, including a significant cyber attack on Jaguar Land Rover (JLR) and US tariffs, has contributed to this downturn, raising concerns about the future viability of the sector.
Production Numbers Plummet
In total, 764,715 cars and commercial vehicles rolled off assembly lines last year, marking a stark decline that Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT), described as a “tough” year for the industry. The closure of the Stellantis Vauxhall van factory in Luton, alongside the disruption caused by the JLR cyber incident, has compounded the difficulties faced by manufacturers.
The repercussions of this drop in production were felt beyond the assembly plants, negatively impacting the UK’s GDP. To mitigate job losses, the government allocated £1.5 billion to support the JLR supply chain.
Exports Take a Hit
The UK automotive sector’s export performance mirrored the domestic decline, with Europe receiving the bulk of exports at 56.7%. The US and China accounted for 15% and 6.3% of exports, respectively, but uncertainty surrounding tariffs dampened sales to these key markets. Other notable markets included Turkey and Japan, with Canada, Australia, South Korea, Switzerland, and the UAE rounding out the top export destinations.
Despite the grim figures, there are signs of life at the end of the tunnel. As production at JLR began to normalise and the new electric Nissan Leaf commenced production in Sunderland, the last quarter of 2025 showed a slight uptick, fostering some optimism for the future.
A Promising Outlook for 2026
Looking ahead, industry leaders are cautiously optimistic. Hawes anticipates a recovery, projecting total vehicle production to rise to approximately 824,000 units in 2026. The introduction of new electric models, including those from Jaguar and the Nissan Leaf, is expected to play a pivotal role in this rebound.
The production of battery electric vehicles (BEVs), plug-in hybrids (PHEVs), and hybrids (HEVs) already rose by 8.3% to a record 298,813 units, claiming a remarkable 41.7% share of total output. With a new generation of electric cars set to hit the market, the potential for growth is substantial.
Hawes envisions a pathway towards one million vehicle productions in the coming years, contingent on attracting new investment, likely from emerging markets. However, a stable domestic market and lower energy costs remain essential to fostering this growth.
Challenges Ahead
While the forecast is positive, the SMMT has called for a reconsideration of the stringent EV mandate, which imposes hefty penalties on manufacturers failing to meet electric vehicle sales targets. In 2025 alone, these penalties totalled around £5 billion, a figure deemed unsustainable by industry leaders.
Hawes acknowledged the multitude of challenges facing the sector, including structural changes, new trade barriers, and the impacts of cybersecurity incidents. Nevertheless, he remains hopeful that the launch of new electric models, combined with an improving economic landscape, could signal a turning point for the industry.
Why it Matters
The decline in UK car production not only underscores the fragility of the automotive sector but also raises questions about the nation’s economic resilience. With significant investments and support from the government, the industry must navigate its way back to growth, ensuring it remains competitive on the global stage. The trajectory of the automotive market will be a key indicator of the UK’s broader economic health moving forward, making the coming years critical for recovery and sustainability.