(qlmbusinessnews.com . Thu 24th Jul, 2025) London, UK —
Government EV Subsidies Aim to Revive UK's Declining Car Manufacturing Sector
UK car and van manufacturing in the initial half of this year plummeted to its lowest point since 1953, with the exception of the period during the Covid shutdown, recent figures reveal.
The production of vehicles suffered a notable setback, with car manufacturing decreasing by 7.3% and van production witnessing a drastic 45% drop in the six months leading up to June. This downturn was in part due to the closure of Vauxhall's Luton van facility, according to data from the Society of Motor Manufacturers and Traders (SMMT).
The uncertainty surrounding tariffs in the United States – the UK car industry's second-largest marketplace – contributed to the deceleration or complete halt of production activities in the year's first half.
In response to the industry's struggles, the SMMT expressed optimism towards the recently enacted US-UK tariff agreement, which aims to restore confidence. Concurrently, the government has underscored its commitment to invigorating the sector through electric vehicle (EV) subsidies.
While the SMMT acknowledged the introduction of EV grants, it critiqued the scheme for its lack of precision and criticised the absence of industry consultation prior to its implementation.
Mike Hawes, the CEO of SMMT, branded the half-yearly production statistics as “depressing” but maintained hope that the industry had reached its lowest ebb during this period.
The reduction of tariffs from 27.5% to 10% in a deal with the US, effective from the 30th of June, was greeted with a marginal uptick in vehicle manufacturing in June. Yet, the SMMT maintains a cautious outlook, not foreseeing a return to the 2021 production figures of one million vehicles by the end of this decade.
Hawes commented on the government's ambitious target of producing 1.3 million vehicles annually by 2035, suggesting significant investment and the introduction of new manufacturers into the UK market as essential for achieving this goal.
The production of electrified vehicles, including battery, hybrid, and plug-in hybrids, saw a modest increase of 1.8%, constituting over two-fifths of the total vehicles produced.
In a bid to stimulate the market, the government recently announced the reintroduction of grants up to £3,750 for EVs priced at or below £37,000, a move welcomed by the SMMT notwithstanding the existing confusion regarding the eligibility criteria for these subsidies.
The determination of eligible vehicles will consider the carbon footprint associated with their production and batteries, favouring manufacturers with verified science-based targets. However, specifics regarding these thresholds remain ambiguous.
Hawes highlighted the industry's need for clarity, especially with September approaching, a critical month for new car registrations.
A spokesperson from the transport department assured that “dozens of models” would qualify for the electric car grant, which is anticipated to significantly benefit the industry and offer substantial savings to drivers.
The department remains engaged with vehicle manufacturers, offering guidance to ensure the swift availability of these discounts, with the £650 million grant pot being allocated on a first-come, first-served basis.
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