UK Car Manufacturing Faces Historic Decline Amid Tariff Challenges

In the first half of 2025, UK car manufacturing has plummeted to its lowest level since 1953, excluding the pandemic year of 2020. According to figures released by the Society of Motor Manufacturers and Traders (SMMT) on July 24, 2025, production fell by 12%, resulting in the manufacture of just 417,200 vehicles. This decline has been attributed largely to the chaotic impact of tariffs imposed by the Trump administration, which introduced a 25% levy on all car imports, creating significant challenges for British automotive manufacturers.

Mike Hawes, Chief Executive of SMMT, described the current climate as one of the toughest periods for the UK automotive sector. "It has been one of the toughest periods for UK automotive," Hawes stated, expressing hope that the industry is at the "nadir" before recovery. He emphasized, "The general view is that this is the bottom."

The decline in production comes as carmakers grapple with a transition towards electric vehicles (EVs), amidst slower-than-expected sales and supply chain disruptions. Notably, Stellantis has announced the closure of its Vauxhall van factory in Luton, highlighting the gravity of the situation. The tariffs imposed by the US have particularly threatened the export market for luxury British car manufacturers such as Bentley, Rolls-Royce, and Jaguar Land Rover. These manufacturers halted shipments from April 2025, while hoping for a reduction in tariffs.

The outlook for the second half of 2025 appears somewhat optimistic, following the establishment of a quota agreement with the Trump administration allowing for 100,000 exports a year at a reduced tariff of 10% from the end of June. In June, car and van production rose by 7% compared to the same month in the previous year, suggesting a potential rebound. Hawes noted that the quota would help the industry maintain sales levels similar to those of 2024, though further negotiations would be necessary for growth beyond that threshold.

Furthermore, the recent decision by the UK Labour government to subsidize electric car sales by up to £3,750 has been welcomed by some industry leaders, including Nissan, which plans to commence production of its new Leaf electric vehicle in Sunderland. These subsidies, amounting to £650 million, are restricted to cars priced below £37,000, and strict carbon dioxide emission regulations may limit eligibility for imports from outside Europe, particularly from countries like China and South Korea.

However, despite the positive aspects of these developments, Hawes expressed concerns regarding the implementation of the subsidy scheme, noting the lack of consultation with industry stakeholders during its design. This has resulted in uncertainty for manufacturers, as details about the scheme remain undisclosed, complicating pricing strategies and sales projections.

As a result of these challenging conditions, the SMMT has revised its production forecasts significantly from earlier expectations. In 2017, the organization had set a target of producing 2 million vehicles annually in the UK, but current projections suggest only 755,000 units will be manufactured in 2025, down from an earlier estimate of 815,000 made in April.

The implications of this decline are profound, affecting not just the automotive sector but the broader UK economy, which relies heavily on manufacturing as a pillar of economic strength. With the automotive industry facing these mounting pressures, the future of car manufacturing in the UK remains uncertain, dependent on both domestic policy decisions and international trade relations.