Reflecting the ongoing product transitions, trade and investment uncertainty, the latest independent production outlook from AutoAnalysis anticipates total UK car and light vehicle output will be broadly flat this year, at 740,000 units, before returning to growth in 2027.

The Society of Motor Manufacturers and Traders (SMMT) says the potential to surpass one million units, which would require output to grow by some 40%, still exists but only if further new model investment can be secured by making the UK more globally competitive for manufacturing.

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With major investment decisions being made now, and a new Government in place, SMMT is urging rapid implementation of the Modern Industrial Strategy.

Given energy price volatility, the UK’s uncompetitive industrial electricity prices, even after the introduction of the British Industrial Competitiveness Scheme (BICS), must be addressed, it warns.

Reform of the zero emission vehicle (ZEV) mandate is also crucial, according to the SMMT. Manufacturers are investing billions in zero-emission technologies, but regulation remains ahead of demand, making the cost of selling in the UK untenable and undermining any case for local manufacturing investment, it says.

Fair EU trade is equally critical, it argues, with ‘Made in Europe’ and rules of origin issues threatening cross-Channel trade and supply chains.

Left unresolved, SMMT says they threaten an €80 billion-a-year trading relationship as well as Europe and the UK’s wider automotive competitiveness.

Mike Hawes, SMMT chief executive, said: “Global vehicle production remains under intense pressure, and the UK is no exception.

“Global market weakness, trade pressures and uncompetitive costs are taking their toll. But decline is not inevitable.

“Urgent action on energy costs, reform of market regulation and improved trading arrangements with our global partners would ensure the sector can return to growth.

“And given that growth would be across every region in the UK, there is every reason for the new Government to get behind the sector.”

At stake, SMMT argues, is an industry turning over more than £85 billion and employing 188,000 people, while the wider sector, including retail and service, maintenance and repair, automotive is worth nearly £400bn and supports 830,000 jobs.

UK vehicle production figures for first half of 2026

UK vehicle production fell 7.5% in the first half of 2026, with factories turning out 385,979 cars and commercial vehicles, according to the latest figures from the SMMT.

Despite a challenging start to the year, however, output stabilised in the second quarter, dipping by just 128 units (-0.1%) year-on-year, as exports strengthened and car production returned to marginal growth.

Overall production for export reached 294,222 units in the first six months, down 5.6% on the same period last year, while output for the domestic market fell more sharply, down 13.2% to 91,757 units.

In the second quarter, however, exports increased, rising by 5,075 units (3.9%).

June performance was particularly strong as car exports rose for the third consecutive month, up 4.5%, and commercial vehicle exports surged by 54.3%, albeit from a weak base.

Overall output in June continued to steady, following a rise in May, easing by just 1.2% to 68,200 units.

In the year-to-date, exports represent 76.2% of all vehicles built, underlining the importance of free and fair trade with global markets.

The EU remained by far the sector’s biggest customer – and supplier – taking 58.3% of car shipments, up 3.4% year on year to 166,801 units.

The US was second, with 45,162 units accounting for 15.8% of exports, although volumes fell by 4.6%. China, the third biggest market, took 12,323 units, down 44.7% on H1 2025.

Emily Sawicz, director and industrials senior analyst at RSM UK, said: “The year-on-year decrease in UK vehicle production marks a pivotal time for the sector as global competition and pressures continue to mount.

“With companies such as Volkswagen announcing plans for major job cuts, there is a clear need for action across the European car market to secure opportunities for future growth.

“As Chinese manufacturers continue to flush through the UK and wider European markets, domestic companies face increasingly urgent pressure to respond quickly to maintain a competitive edge.

“This could include utilising UK workforce and production capabilities to facilitate Chinese car production, such as with the production of Chery cars at Nissan’s Sunderland plant, to unlock sector growth.”

She added: “The proposed ‘Made in Europe’ initiative could also have a decisive impact on the UK’s export market.

“Inclusion in the scheme could significantly boost to UK car production activity, which would benefit from the investment incentives and subsidies available to their European counterparts.

“However, this will need to be balanced against any potential regulatory conflicts with domestic investment strategies, and the potential of the UK being left out of the initiative altogether.

“With potential changes to EV mandates further fuelling uncertainty in the sector, there is a risk that manufacturers will hold off from making investment decisions until the policy direction of Andy Burnham’s Government becomes clear. Therefore, greater clarity is urgently needed to unlock longer-term sector growth.”