What's the latest in the UK car market in 2025?

As 2025 unfolds, the UK car industry finds itself at a pivotal moment. Faced with an evolving regulatory landscape, global supply chain pressures, and shifting consumer behaviours, manufacturers and retailers are adapting to change while trying to stay competitive. Recent government moves, including a breakthrough on tariffs with the United States and adjustments to electric vehicle (EV) mandates, aim to support the sector—but not without controversy.

Here’s a look at the latest updates shaping the future of motoring in the UK.

1. US Tariff Deal Unlocks Export Potential

One of the most promising developments comes from international trade talks. The UK and the US are nearing an agreement that would slash those one-sided tariffs on British car exports—particularly those from brands like Jaguar Land Rover, Mini, and Aston Martin. Currently, UK-built vehicles face a 27.5% tariff when entering the US market. Under the new arrangement, this could drop to10%, significantly improving competitiveness and boosting export volumes.

This is quite important for luxury and specialist manufacturers, many of whom have been hit hard by post-Brexit trade complications. The deal still requires final approval, but its implications are far-reaching—signalling renewed support for a global, export-driven strategy at a time when domestic sales remain unpredictable.

2. Electric Vehicle Incentives: A Mixed Bag

While trade policy may bring relief to exporters, domestic EV buyers are facing a complex outlook. On the upside, the government is proposing the removal of VAT from public EV charging—a move that could save drivers without home charging access up to £200 per year! This change supports broader electrification goals and provides a more equitable path for those living in flats or urban areas.

However, the benefit is somewhat offset by new taxes on EVs. From 2025, all electric cars will be subject to Vehicle Excise Duty (VED), adding an annual cost of £195 after the first year. Expensive EVs—those over £40,000—will also incur a luxury car tax. While fleet buyers and company cars remain incentivised through low Benefit-in-Kind rates, the private EV market could slow if affordability concerns grow.

3. ZEV Mandate Softens in Response to Industry Pressure

Another headline change is the softening of the UK’s Zero Emission Vehicle (ZEV) mandate. Originally intended to force a rapid transition to electric-only vehicles, the mandate now allows manufacturers to continue selling hybrids—both standard and plug-in—until 2035. Small volume manufacturers have also been exempted, and financial penalties for missing EV targets have been reduced.

Industry players welcomed the move as a necessary compromise in the face of US tariffs and lagging charging infrastructure. Yet critics warn that this could undermine climate targets and slow the UK’s transition to clean transport. The next few years will be a test of whether policy and industry can strike the right balance between ambition and realism.

Conclusion: Industry at a Crossroads

The latest developments offer both opportunity and challenge. Tariff reductions promise to supercharge UK car exports, while new EV tax relief measures could encourage uptake—at least for some drivers. However, softening environmental mandates risks sending mixed signals. As the UK navigates this transition, one thing is clear: alignment between policy, infrastructure, and market forces will be crucial to ensuring long-term industry success. Whether 2025 becomes a turning point or a missed opportunity may depend on the next moves from both government and the sector itself.