UK car production hits 70-year low, but EV surge and US trade deal offer glimmer of hope

British car and van manufacturing has plummeted to its lowest levels since 1953, excluding the anomaly of the Covid-19 pandemic shutdown.

New data from the Society of Motor Manufacturers and Traders (SMMT) reveals a 7.3% drop in car output and a staggering 45% decline in van production during the first half of 2025, largely due to global economic uncertainty, trade protectionism and the closure of Vauxhall’s Luton van plant.

Mike Hawes, SMMT chief executive, described the half-year figures as “depressing,” expressing hope that this period marks “the nadir” for the UK auto industry. The slump was exacerbated by uncertainty surrounding US tariffs, which led some firms to slow or halt production in anticipation of potential trade barriers.

However, a significant shift in the trade landscape offers a ray of optimism. A new trade deal with the United States, effective from June 30th, has slashed tariffs on UK-made cars exported to the US from 27.5% to a more favourable 10%. This agreement has already seen a small uptick in vehicle production in June, with the US remaining the UK’s biggest single export market despite recent declines.

“The implementation of the new trading agreement between the UK and US is good news for US customers and a huge relief for the UK automotive companies that export to this critically important market,” stated the Department for Business and Trade.

Adding to the cautious optimism is the undeniable rise of electric vehicles (EVs). Production of electrified vehicles in the UK increased by 1.8% in the first half of the year, with battery, hybrid, and plug-in hybrid models now accounting for a record two in five (41.5%) of all vehicles produced.

It is hoped this EV surge will be further boosted by the government’s reintroduction of grants up to £3,750 on eligible EVs. This is despite a lack of clarity regarding qualifying vehicles. “The difficulty is… nobody, not even government, really knows yet, which models and which brands will qualify,” commented Hawes, urging for immediate clarity, especially with September being a crucial month for new car registrations.

While the SMMT doesn’t anticipate a return to 2021 production levels of one million vehicles until the end of the decade, the combination of reduced US tariffs and the accelerating shift towards EV manufacturing provides a foundation for future growth.

Business Secretary Jonathan Reynolds underscored the government’s commitment, calling the automotive sector the “jewel in the crown” of British manufacturing and highlighting measures adopted to support the industry. The challenge now lies in the rapid implementation of support measures and attracting further investment to reignite UK automotive production.