The UK’s automotive sector has hit a historic low, with car and van production in the first half of 2025 dropping to levels not seen since 1953, excluding the COVID-related shutdowns, according to the Society of Motor Manufacturers and Traders (SMMT). Car output fell by 7.3%, while van production plummeted 45%, largely due to the closure of Vauxhall’s Luton plant in April.

Uncertainty surrounding US tariffs, a critical issue for the UK’s second-largest vehicle export market, led several manufacturers to scale back or halt production earlier this year. A new US-UK tariff agreement, effective June 30, reduced tariffs from 27.5% to 10%, sparking a slight uptick in June’s production figures. However, the SMMT warns that returning to the 2021 benchmark of one million vehicles annually by decade’s end is unlikely.

Mike Hawes, SMMT chief executive, described the figures as “grim” but expressed hope that this marks the industry’s lowest point. He emphasized the need for new manufacturers to enter the UK market to meet the government’s ambitious target of 1.3 million vehicles per year by 2035.

Despite the downturn, electrified vehicle production—encompassing battery, hybrid, and plug-in hybrid models—grew by 1.8%, making up over 40% of total output, a record high. The government recently reinstated grants of up to £3,750 for electric vehicles (EVs) priced at or below £37,000, aiming to bolster the sector. However, the initiative, which ties eligibility to carbon emissions from vehicle and battery production, has sparked confusion. The criteria remain vague, with unverified reports suggesting Chinese and Korean models may be excluded.

Business Secretary Jonathan Reynolds called the automotive industry a “cornerstone” of British manufacturing but voiced concerns over external pressures, including US trade policies and surging production capacity in China. The SMMT welcomed the return of EV incentives, absent since 2022, but Hawes criticized the lack of clarity, noting that neither manufacturers nor dealers can confirm which models qualify. With September being a peak month for car registrations, this ambiguity could hinder sales.

The government has allocated £650 million for the grants, to be distributed on a first-come, first-served basis. A transport department spokesperson claimed “dozens” of models would qualify, promising significant savings for drivers and a boost for the industry. They added that guidance has been issued to streamline manufacturer applications.

As the UK automotive sector navigates these challenges, the path to recovery hinges on clearer policies, new market entrants, and sustained global trade stability.