UK new-car sales have taken a hit in 2025, with the latest figures showing a decline amid ongoing economic uncertainty and supply chain challenges. The Society of Motor Manufacturers and Traders (SMMT), the industry’s main trade body, released data indicating a concerning dip in new vehicle registrations for the month of July.
This downturn, while not entirely unexpected, marks a turning point in what had previously been a slow but steady recovery post-pandemic. Experts now warn that a mix of inflation, interest rate pressures, and cooling demand is reshaping the UK car market in ways that could linger well into 2026.
New-Car Sales Dip for the First Time in a Year
According to the SMMT, UK new-car registrations fell by 8.2% in July 2025 compared to the same period last year. This marks the first year-on-year monthly decline since mid-2022.
Here are the key numbers:
- Total new-car registrations in July 2025: 131,000 units
- Compared to July 2024: 142,700 units
- Year-to-date growth: Still up by 4.1% overall for 2025
- Battery Electric Vehicle (BEV) share in July: 17.1%, slightly down from 17.9% in July 2024
Although the total sales for the year are still ahead of 2024’s numbers, the drop in July suggests the market’s momentum may be stalling.
Why Are UK New-Car Sales Falling?
There isn’t just one reason for the fall in UK new-car sales—several economic and structural factors are contributing:
Cost-of-Living Pressures
Many consumers are holding back on big purchases, including new vehicles. With the Bank of England keeping interest rates high to tackle inflation, the cost of borrowing remains steep. Personal finance is tight for many households, which is directly affecting car buying decisions.
“Consumers are cautious, and rightfully so. Big-ticket items like new cars are the first to be postponed,” said an analyst from Deloitte UK.
High Financing Costs
Most car purchases in the UK are financed. With interest rates hovering around 5.25%, monthly payments for car loans and PCP (Personal Contract Purchase) deals have risen significantly. This makes new vehicles less attractive compared to cheaper, second-hand options.
Electric Vehicle Transition Woes
Although the UK is moving toward an all-electric future, the EV transition is proving slower than planned. Despite government incentives and zero-emission targets, consumers are hesitant. Concerns about charging infrastructure, battery range, and upfront costs remain strong.
In July, electric vehicles accounted for only 17.1% of the market—a decrease compared to the same period last year.
EV Market Growth Slowing Down
The government’s ambitious target to ban the sale of new petrol and diesel cars by 2035 is still in place. But the transition to EVs has hit a bump in the road.
The SMMT has urged the government to extend subsidies and invest more in public charging stations. It also warned that delays in infrastructure could damage consumer confidence in electric cars.
Common EV Concerns:
- Limited access to charging points, especially outside cities
- Higher purchase costs than traditional cars
- Uncertainty over battery longevity and resale value
“The UK must not lose momentum in its electric journey,” said Mike Hawes, CEO of the SMMT. “This is a crucial decade for transformation.”
Market Volatility Taking a Toll
The UK’s broader economic landscape is adding to the challenges faced by the automotive sector.
Inflation and Interest Rates
Although inflation has dropped from its 2022 highs, it remains sticky. The Bank of England’s tight monetary policy has cooled spending and led to uncertainty in sectors that rely on consumer confidence.
Brexit-Related Costs
Post-Brexit regulations are also causing disruptions in supply chains and increasing costs for imported parts and vehicles. Car manufacturers operating in the UK, including Nissan and Toyota, have reported increased operational challenges.
Which Brands Are Hit the Hardest?
The July data suggests that mass-market manufacturers are feeling the pain more than luxury brands.
Key Highlights:
- Ford, Vauxhall, and Volkswagen all saw double-digit declines in registrations
- Tesla held steady thanks to a surge in fleet sales
- BMW and Mercedes-Benz saw minor growth, supported by leasing deals and premium demand
Interestingly, Chinese electric brands such as BYD and MG continued gaining market share in the EV segment, offering more affordable models with decent range.
Fleet vs. Private Buyers
One of the most notable trends in the UK car market right now is the shift toward fleet and business buyers over private individuals.
In July 2025:
- Fleet registrations rose by 2.7%
- Private registrations dropped by 17.5%
This widening gap shows that individual buyers are under pressure, while fleet managers—often with tax incentives and long-term planning—are still investing in vehicle upgrades.
What the Industry Wants From the Government
The SMMT and other trade bodies are calling for:
- Lower VAT on EV purchases
- Increased funding for public charging infrastructure
- Incentives for scrapping older vehicles
- More flexible finance schemes for private buyers
They argue that without these measures, the UK risks missing both its climate targets and its economic recovery goals.
Could This Be a Sign of a Longer-Term Shift?
The recent dip in UK new-car sales may not just be a temporary issue. Analysts believe that a permanent shift in consumer behavior could be underway, especially among younger generations who may prefer:
- Car-sharing and subscription models
- Public transport and cycling
- Delaying car ownership due to affordability
“The definition of car ownership is evolving,” said Lucy James, an automotive analyst with KPMG. “We are entering an age where mobility doesn’t always mean buying a brand-new car.”
What’s Next for the UK Car Market?
While the July numbers are concerning, the full-year picture may still end up positive. However, the direction of UK new-car sales in the coming months will likely depend on:
- Interest rate decisions by the Bank of England
- Government policy on EV support and charging infrastructure
- Improvement in global supply chains
- The success of automakers in launching affordable electric vehicles
If these factors align positively, a recovery could start by early 2026. If not, 2025 may go down as a turning point for the British automotive industry.
Final Takeaway
The fall in UK new-car sales is a wake-up call for both the government and the auto industry. While market volatility plays a big role, structural issues like financing costs, EV hesitancy, and changing consumer behavior are also key contributors.
Stakeholders need to act fast to rebuild momentum in the sector—especially as the countdown to 2035’s petrol and diesel ban continues. Whether that means more incentives, better infrastructure, or innovative vehicle ownership models, it’s clear that the current model isn’t working for everyone.
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