UK and European car industries found themselves riding a wave of optimism in July 2025, as new figures revealed a rare uptick in production and sales across the region. Yet, beneath the surface, the numbers tell a more complex story—one marked by shifting export patterns, the rise of electric vehicles, and a fierce rivalry between established and emerging automakers.
According to the Society of Motor Manufacturers and Traders (SMMT), UK car production rose for the second consecutive month, up 5.6% to 69,127 units in July. This growth offered some much-needed reassurance to an industry grappling with weak consumer confidence, volatile trade flows, and the ongoing challenge of adapting to new technologies. Mike Hawes, SMMT chief executive, summed up the mood by saying, “It remains a turbulent time for automotive manufacturing, with consumer confidence weak, trade flows volatile and massive investment in new technologies underway both here and abroad. Given this backdrop, another month of growing car output is good news – signalling the sector’s underlying resilience in the face of intense global competition.”
However, not all sectors shared in the good fortune. Commercial vehicle output plummeted by a staggering 81.1% compared to the previous July, a drop attributed to plant restructuring and an unusually strong performance in July 2024, which had marked the best July for commercial vehicles in 17 years. This sharp decline in commercial vehicles dragged total vehicle production down by 10.8% to 72,006 units for the month.
Despite the overall dip in total vehicle output, car production for both domestic and export markets improved. Production for the UK market rose 13.6%, while exports climbed 3.7%. Overseas markets continued to dominate, absorbing 79.4% of all UK-made cars. The European Union remained the primary destination, accounting for 45.6% of exports, followed by the USA (18.1%), China (7.7%), Turkey (7.2%), and Japan (3.4%). Notably, while shipments to the EU and China fell by 7.9% and 7.1% respectively, exports to Turkey and Japan surged by 35.4% and 14.9%. Exports to the USA also rebounded, rising by 6.8% to nearly 10,000 units—an encouraging reversal after three straight months of decline.
“The USA remains the largest single national market for British-built cars, underscoring the importance of the UK-US trade deal,” the SMMT report noted, highlighting the positive impact of the trade agreement that came into force at the end of June. Other markets, including Australia, Canada, Korea, the UAE, and Switzerland, rounded out the top ten export destinations, though together they accounted for just 6% of shipments in July.
Looking at the broader picture, the year-to-date figures paint a more cautious scene. Total vehicle output for 2025 so far is down 11.7%, with just under half a million units (489,238) produced. But there’s a glimmer of hope on the horizon: independent forecasts suggest growth will return in 2026, with output expected to rise 6.4% to 803,000 units. Much of this optimism rests on the rapid implementation of the UK’s new Industrial Strategy—including the DRIVE35 programme—along with efforts to reduce energy costs, improve infrastructure, and address persistent skills gaps.
Across the Channel, the European auto market was also celebrating a rare win. Registrations jumped nearly 6% across the EU, UK, and European Free Trade Association region—the biggest monthly rise in more than a year, according to the European Automobile Manufacturers Association (ACEA). In total, 1.09 million vehicles were registered in July, offering a much-needed boost for an industry squeezed by rising costs, regulatory pressures, and uncertain consumer demand.
What powered this surge? Plug-in hybrid and battery-electric vehicles stole the show. Germany, in particular, led the charge after launching new EV incentives, with electric car sales up a whopping 58% and plug-in hybrids soaring nearly 84% compared to the previous year. Battery electric, hybrid electric, and plug-in hybrid vehicles together accounted for nearly 60% of all new registrations in July, up from 51% a year earlier.
But the electric vehicle (EV) landscape is changing fast—and not always in ways that industry giants might hope. Tesla, once the darling of the European EV scene, saw its market share shrink for the seventh straight month, falling to just 0.8% from 1.4% the previous July. In contrast, China’s BYD made its first appearance in the European monthly figures and immediately edged past Tesla, claiming 1.2% of the market. BYD’s sales exploded by 225% year over year, while Tesla’s dropped by 40%.
The battle for EV supremacy is heating up, with established European brands also jockeying for position. Volkswagen and Renault both posted solid gains of 11.6% and 8.8%, respectively, while Stellantis saw a modest dip of 1.1%. Germany’s overall car sales rose 11.1%, leading the continent, but not all major markets shared in the growth. The UK, France, and Italy all slipped into negative territory, even as smaller markets like Spain (up 17%), Poland (up 16.5%), and Austria (up more than 31%) helped offset the declines.
Despite the positive headlines, industry leaders remain wary. ACEA’s CEO Ola Kaellenius, alongside other executives, co-signed a letter to the European Commission urging a rethink of the 2035 zero-emission targets, which they described as “increasingly unfeasible.” The letter reflects broader concerns about the pace and practicality of regulatory demands, as well as the need for supportive policies to help manufacturers navigate the transition to electric and low-emission vehicles.
Back in the UK, the call for government action echoes across the sector. Mike Hawes of SMMT emphasized the need for government strategies to become tangible actions, arguing that a thriving automotive sector “can support well paid jobs and economic development across the UK.” The DRIVE35 programme and other initiatives are seen as critical to improving the UK’s competitiveness and attracting much-needed investment, especially as the global race for automotive innovation intensifies.
For now, July’s results offer a rare and welcome bright spot in an otherwise challenging year. The numbers reveal an industry in flux—resilient, yes, but facing mounting pressure from new technologies, shifting trade dynamics, and a rapidly changing competitive landscape. As the EV race heats up and international trade deals reshape markets, the next chapter for UK and European automakers promises to be anything but predictable.
