UK Vehicle Production Hits 73-Year Low: What the 2025 SMMT Figures Mean for Manufacturers

The State of UK Vehicle Manufacturing: What the Numbers Really Tell Us

The Society of Motor Manufacturers and Traders (SMMT) published its annual production figures on 29 January 2026, and they make for uncomfortable reading. UK vehicle production fell 15.5% in 2025 to just 764,715 units, the lowest annual total since 1952. Car output dropped 8.0% to 717,371 units while commercial vehicle production collapsed 62.3% to 47,344 units.

For context, that is fewer vehicles than the UK produced during the COVID-19 pandemic years of 2020 (920,000 units) and 2021 (859,000 units). It represents roughly 150,000 fewer vehicles than 2024, wiping out years of post-pandemic recovery in a single calendar year.

But beneath the headline figures lies a more complex picture: one of structural upheaval, targeted disruption, and a sector that may be closer to a genuine turning point than the raw numbers suggest.

What Went Wrong in 2025

Three forces converged to make 2025 what SMMT Chief Executive Mike Hawes described as “the toughest year in a generation for UK vehicle manufacturing.”

The JLR Cyber Attack

The single most damaging event was a major cyber attack on Jaguar Land Rover, the UK’s largest automotive employer. The incident began on 31 August 2025 and forced a complete shutdown of JLR’s manufacturing operations. Production lines at Solihull, Castle Bromwich, and Halewood stood idle for approximately six weeks, with the company estimating losses of around £50 million per week during the outage.

JLR began a phased restart from late September, but according to its own trading update, production only “returned to normal levels by mid-November.” The downstream effects were significant. Aston Martin, which shares suppliers with JLR, warned of disruption to its own operations. Hundreds of smaller Tier 2 and Tier 3 suppliers across the Midlands faced cancelled orders and cash flow uncertainty.

The attack’s impact is visible in the monthly data. UK car production in September fell 35.9% year on year. October showed continued weakness, and November saw output still down nearly 25% as JLR’s phased restart worked through the system.

Transatlantic Tariff Turbulence

The Trump administration’s imposition of 25% tariffs on automotive imports in April 2025 sent shockwaves through the UK’s export-led industry. Although the UK-US Economic Prosperity Deal, announced in May and enacted on 30 June 2025, reduced the tariff to 10% for the first 100,000 UK vehicles exported annually, the months of uncertainty had already damaged forward planning and order books.

UK car exports to the United States fell 18.3% across the full year. For context, the US is the UK’s second largest export market, accounting for 15.0% of all vehicles shipped overseas. The damage was concentrated in the first half of the year, when manufacturers were operating under the full 25% tariff and scrambling to understand the new trade landscape.

Exports to China, the third largest market at 6.3% of shipments, declined 12.5%. Even exports to Europe, which accounts for 56.7% of UK automotive exports, fell 3.3% as broader economic headwinds dampened continental demand.

Commercial Vehicle Restructuring

The 62.3% decline in commercial vehicle production reflects a structural change rather than a cyclical downturn. The consolidation of two CV manufacturing plants into a single facility drove the bulk of this reduction. While the headline figure looks alarming, the restructuring was planned and is expected to result in a leaner, more competitive operation going forward.

The Export Picture: Still an Export Powerhouse, but Vulnerable

UK automotive manufacturing remains overwhelmingly export-oriented. In 2025, 77.5% of all cars produced were shipped overseas, with 555,826 units leaving the country. That figure was down 7.9% on the previous year.

The top five export destinations tell the story of UK automotive’s geographic dependencies:

• European Union: 56.7% of exports (down 3.3%)
• United States: 15.0% of exports (down 18.3%)
• China: 6.3% of exports (down 12.5%)
• Turkey: Fourth largest market
• Japan: Fifth largest market

Canada, Australia, South Korea, Switzerland, and the UAE complete the top ten.

The concentration of exports in Europe underscores why the looming 2027 Rules of Origin tightening under the Brexit Trade and Cooperation Agreement remains such a critical issue. From 2027, stricter local content requirements will apply to vehicles traded tariff-free between the UK and EU. Manufacturers who cannot demonstrate sufficient UK or EU content in their vehicles, particularly in battery components, risk losing tariff-free access to a market that absorbs more than half of all UK automotive exports.

This is not a theoretical risk. It is a deadline that supply chain and procurement teams across the sector should be planning for now.

The EV Transition: A Genuine Bright Spot

Against the backdrop of declining overall production, electrified vehicle manufacturing delivered the one genuinely positive story of 2025. Production of battery electric (BEV), plug-in hybrid (PHEV), and hybrid (HEV) vehicles rose 8.3% to a combined 298,813 units, representing a record 41.7% share of total UK car output.

That share is significant. It means that nearly two in every five cars rolling off UK production lines are now electrified in some form. And the pipeline for 2026 and beyond is substantial.

New Models Entering UK Production

The most significant development arrived in December 2025, when the third-generation Nissan LEAF entered full-scale production at Nissan’s Sunderland plant as part of the EV36Zero project. This is the first high-volume battery electric vehicle to be built in the UK since 2020, and it represents a turning point for the country’s EV manufacturing credentials.

The LEAF will be joined on the Sunderland line by a fully electric version of the Nissan Juke in 2026, further establishing the North East plant as a dedicated EV manufacturing hub.

At Oxford, BMW is investing £600 million to retool the MINI Plant for production of two new all-electric models: the MINI Cooper 3-door and the compact crossover MINI Aceman. Both are scheduled to enter UK production in 2026, with the plant transitioning to all-electric production by 2030.

In total, seven new EV models are planned for UK production launch across the year. If these programmes remain on track, the SMMT’s independent production outlook (produced by AutoAnalysis) forecasts UK car output rising by more than 10% to approximately 790,000 units in 2026, with total light vehicle production reaching 824,000 units.

The most ambitious target: one million vehicles by 2027, provided new model launches stay on schedule and competitive conditions improve.

Government Policy: DRIVE35, BICS, and the Industrial Strategy

The government has set out a comprehensive, if complex, policy framework to support the sector’s recovery.

DRIVE35

Launched in July 2025, DRIVE35 is a £2.5 billion programme spread over ten years (£2 billion in direct funding to 2030, plus £500 million for R&D to 2035). It replaces and builds upon the Automotive Transformation Fund and the Advanced Propulsion Centre competitions, which between them leveraged over £6 billion in private sector investment.

DRIVE35 targets the full spectrum of the EV transition: from gigafactory-scale battery manufacturing to start-up innovation and prototyping. Early funding announcements include over £100 million in capital investment from Astemo Ltd. in Bolton for electric inverter production and £15 million from Dana in the West Midlands for EV components.

For manufacturers and supply chain companies, the programme represents the clearest signal yet that government is willing to co-invest at scale in the UK’s automotive future. The key question is whether the funding flows quickly enough to influence investment decisions that are being made now.

British Industrial Competitiveness Scheme (BICS)

Perhaps the most consequential policy intervention for manufacturing competitiveness is the British Industrial Competitiveness Scheme. Launched for consultation in November 2025 with an April 2027 start date, BICS promises to reduce electricity bills for eligible manufacturers by up to 25%, equivalent to a saving of £35 to £40 per megawatt hour.

The scheme works by exempting eligible manufacturers from the indirect costs of the Renewables Obligation (RO), Feed-in Tariffs (FIT), and Capacity Market (CM) charges that are currently loaded onto electricity bills. Target sectors include automotive, aerospace, chemicals, ceramics, glass, and their foundational supply chains.

The SMMT has been vocal that the entire automotive sector, including the extended supply chain, must be eligible for the scheme. This is not a minor detail. If only final assembly plants qualify, the cost advantage will not flow through to the hundreds of smaller component manufacturers and processors that form the backbone of the UK automotive supply chain.

For operations directors and finance teams, BICS eligibility should be on the planning radar now. The consultation closed in January 2026, and the final eligibility criteria will determine which manufacturers see meaningful relief and which remain exposed to the UK’s electricity prices, which currently sit approximately 125% above the EU median.

The Broader Industrial Strategy

DRIVE35 and BICS sit within the government’s Modern Industrial Strategy, which sets an ambition for UK automotive production to reach over 1.3 million vehicles per year by 2035. That target requires a near-doubling of current output and almost certainly implies attracting at least one major new manufacturer to the UK, likely a Chinese OEM.

The strategy also encompasses trade policy. The UK-US deal on automotive tariffs, while imperfect, provides a workable framework for the approximately 100,000 vehicles the UK exports to America annually. The challenge lies in ensuring that the 2027 Rules of Origin changes with the EU do not create a new barrier that offsets the gains made elsewhere.

What This Means for UK Manufacturers

Whether you are an OEM, a Tier 1 supplier, or a specialist component manufacturer, the 2025 production data and the emerging policy landscape create several clear priorities.

Review Your Energy Cost Exposure

With BICS launching in April 2027, now is the time to assess whether your operations will qualify and model the potential savings. If the £35 to £40 per MWh reduction applies to your facility, the impact on unit economics could be significant, particularly for energy-intensive processes such as casting, forging, heat treatment, and painting.

Do not assume eligibility. Engage with the consultation outcomes and ensure your SIC codes and energy consumption profiles are aligned with the scheme’s criteria.

Audit Your Supply Chain for Rules of Origin Compliance

The 2027 EU Rules of Origin tightening will require higher local content thresholds, particularly for battery components. If you are exporting to the EU either directly or as part of a vehicle assembled in the UK, your Bill of Materials needs to be reviewed against the incoming requirements.

Manufacturers who discover compliance gaps in 2027 will face tariffs on their EU-bound products. Manufacturers who identify and address those gaps now have time to restructure sourcing, qualify alternative suppliers, or invest in localising production.

Position for the EV Supply Chain Opportunity

The seven new EV models entering UK production in 2026 represent a significant pull-through of demand for domestically sourced components. Battery cells, electric motors, power electronics, thermal management systems, and lightweight structural components are all areas where UK suppliers can compete for new business.

DRIVE35 funding is specifically designed to support this kind of supply chain development. If you have been considering investment in EV-related capability, the combination of government co-investment and a visible order pipeline makes the business case stronger than it has been in years.

Build Cyber Resilience

The JLR attack should serve as a wake-up call for the entire manufacturing sector. A single incident at one company wiped out months of national production data. The ripple effects through the supply chain demonstrated how interconnected and therefore how vulnerable the UK’s automotive manufacturing ecosystem has become.

If your cyber security posture has not been reviewed in the past twelve months, it is overdue. The National Cyber Security Centre provides sector-specific guidance for manufacturing, and the cost of implementing basic protections is trivial compared to the cost of a production shutdown.

The Outlook for 2026 and Beyond

December 2025 offered a genuine signal of recovery. Car production rose 17.7% year on year to 53,003 units, ending four months of consecutive decline. With the Nissan LEAF now in volume production at Sunderland and six more EV models scheduled for UK launch, the independent forecast of 10% growth in 2026 looks achievable.

The path to one million vehicles by 2027 is more demanding but not implausible. It requires the new model launches to stay on track, the US tariff arrangement to hold, the EU Rules of Origin transition to be managed without disruption, energy costs to come down through BICS, and the domestic market to remain healthy.

That is a lot of conditions. But for the first time in several years, there is a credible framework in place to meet them. The SMMT’s Mike Hawes put it plainly: “2026 must be a year of delivery.”

For UK manufacturers, the message is clear. The worst is likely behind us, but the recovery depends on execution: by government on its policy commitments and by industry on the investments and operational improvements that will determine whether the UK remains a globally competitive place to build vehicles.

The data says 2025 was a historically bad year. The pipeline says 2026 could be the start of something considerably better. The gap between those two realities will be closed not by optimism, but by action.