A Challenging Year for UK Automotive - But Strong Foundations for Future Growth

Electrification Driving Change and Opportunity

Despite broader challenges, production of electrified vehicles continued to rise. Output of battery electric (BEV), plug-in hybrid (PHEV), and hybrid (HEV) cars increased by 8.3%, reaching 298,813 units - a record 41.7% share of total UK car production.

With next-generation, volume electric car production beginning in Sunderland and plans to launch seven new EV models across the UK, overall output is expected to grow in 2026. For drivers and dealers alike, this ongoing shift highlights the increasing importance of reliable warranty protection, particularly as vehicles become more technologically advanced and costly to repair. We take care of cover and claims, so dealers can focus on selling cars with confidence.

Outlook Improves for 2026 and Beyond

The latest independent production outlook forecasts that UK car production will return to growth in 2026, rising by more than 10% to around 790,000 units. Overall light vehicle production is expected to reach 824,000 units, with the potential to grow to one million vehicles by 2027, provided new model launches remain on track and the right market conditions are in place.

Significant public and private investment have already been committed to supporting this transition, including the government’s £4 billion DRIVE35 programme, launched as part of its Modern Industrial Strategy. Achieving the Strategy’s ambition of producing over 1.3 million vehicles per year by 2035 will depend on delivering key commitments - including reducing high energy costs, supporting the UK supply chain, and building a strong and sustainable domestic vehicle market.

Why This Matters for the Automotive Ecosystem

A healthy new car market is vital not only for manufacturers but also for dealers, suppliers, and vehicle owners. As manufacturers increasingly build close to where they sell, long-term confidence in vehicles - supported by effective warranty cover and responsive claims management - becomes essential in maintaining customer satisfaction throughout ownership.

As an export-led industry, automotive manufacturing also relies on a forward-looking trade agenda. Europe remains the UK’s most important automotive trading partner, making tariff-free trade and market access critical amid upcoming changes to Rules of Origin requirements and increasing protectionist policies. Similarly, stability in US trade relations is essential, particularly for small-volume, high-value manufacturers, while new trade agreements with South Korea and India must deliver tangible benefits.

Above all, the UK must continue to promote its automotive expertise and capability on the global stage - supporting innovation, investment, and long-term confidence across the market.