UK vehicle manufacturing still in recovery as EV demand remains under pressure
Commenting on the latest SMMT UK vehicle manufacturing data, Emily Sawicz, Director and Industrials Senior Analyst at RSM UK, said:
“December’s data demonstrates just how challenging last year was for the UK automotive industry with vehicle production hitting a 73-year low. While output remains down year-on-year following disruption at Jaguar Land Rover, the monthly upward trend points to easing volatility as the sector moves into 2026.
“The bigger challenge now sits with demand, particularly in electric vehicles. Recent data indicates that nearly half of UK buyers considering an EV are rethinking that decision, reflecting the combined impact of the Budget, the removal of incentives and the introduction of EV taxation. Demand for hybrids has been particularly strong, but the double hit of an increase in fuel duty and a new road tax for EVs and hybrids risks flattening demand at a critical moment and sits uncomfortably alongside the government’s industrial strategy ambitions.
“Looking ahead, 2026 is shaping up to be decisive for the UK EV market. Perhaps not the large rebound originally expected for 2026, but a period of renewed growth. How strong that growth will be depends on whether confidence can be restored through clearer incentives and long-term policy certainty. Without this, manufacturers will continue to face intense pressure on margins as global EV prices fall and competition increases.
“There are, however, positives on the supply side. Discussions with Chinese manufacturer Chery to build Jaecoo vehicles within existing UK JLR facilities, could provide a meaningful boost to JLR, UK production and the wider economy. At a time when the EU is becoming increasingly protectionist, this presents an opportunity for the UK to rebuild manufacturing capability at home.
“Efficiency will also be a defining factor in the year ahead. With global automotive production expected to dip slightly, manufacturers are accelerating AI adoption to cut costs and protect profitability. Those with the cash and capability to implement these technologies quickly will pull further ahead, widening the gap between market leaders and those struggling to keep pace.
“Targeted government intervention aligned with industrial strategy objectives could play a decisive role in shaping that outcome. Strategic support for domestic production and innovation would help manufacturers manage near term pressures and position the UK more competitively as the sector enters its next growth phase from 2026 onwards.”