The UK new car market returned to growth last month as demand for electric cars soared, but the industry says the discounting behind the uptick is unsustainable and the government must do more to support the switch.
The Society of Motor Manufacturers and Traders (SMMT) notes that it was the best May for new car registrations since 2021 but still 18.9% down on the same month in pre-pandemic 2019. It is also only the second month of growth so far in 2025, "reflecting brittle consumer confidence and economic turbulence".
The organisation attributed the uptick primarily to a surge in fleet registrations, which climbed 3.7% year on year to just over 90,000, accounting for a 60% market share.
Private car sales, meanwhile, were down 2.3% and accounted for 37.4% of the market - and while business registrations grew by a substantial 14.4%, they still made up only 2.6% of registrations.
It was another month of growth for electric cars, with nearly 33,000 units registered – a 25.8% yearly increase – accounting for 21.8% of the market. That's still far below the 28% EV sales mix that manufacturers must achieve this year under the ZEV mandate, but well above the 13.6% and 11.9% shares held by hybrids and plug-in hybrids respectively.
The SMMT says the rise in EV registrations comes off the back of the "attractive incentives" manufacturers are offering in a bid to drive uptake, although the organisation repeated its call for the government to "match this commitment with fiscal incentives".
Halving VAT on new EV purchases, the SMMT says, would put 276,000 new EVs on the road in the next three years, in place of ICE vehicles, resulting in an annual reduction in CO2 emissions of six million tonnes.
It also said the government could "send a signal that now is the time to switch" to EVs by reducing the VAT on public charging and removing electric cars from the Expensive Car Supplement (ECS) - a move the government is understood to be considering already.
While EV sales were up, diesel's decline continued with a huge 15.5% drop in registrations last month, taking oil-burners to just a 5.2% market share. And while petrol cars still make up nearly half of registrations, their sales were down a heavy 12.5%.
SMMT chief executive Mike Hawes said: "A return to growth for new car registrations in May is welcome but manufacturer discounting on new products continues to underpin the market, notably for electric vehicles.
"This cannot be sustained indefinitely as it undermines the ability of companies to invest in new product development – investments which are integral to the decarbonisation of all road transport.
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The taxation is too convoluted and ineffective, Vat, Car Tax, One off 'VED', VED, then 'luxury tax'The 'Luxury Tax' could simply be sliding VAT rate, from minimal for basic transport/Cheap cars, increasing on the valuation of the car, e.g. start raising it above the £40K, revalued by RPI/CPI since inception, upto 100% for stupidly excessive & expensive 'transport' playthings.The gov't should remeber that VED was a 'penalty'/encouragement for pollution outputs, which currently is farcical appart from the current 1st year 1 off charge.And lets be a little socially ballanced: having to pay £420 a year for 5 years on a car costing £40,001, equates to 5.2% of the rrp, yet on a £100K car is only 2.1%, surely if a 'luxury' tax then that should be the other way round, 2% on a poor £40K car and 5% on a 100K car ( if not arguably more)?And how about a £1M car, 0.2% ! Just seems to penalising the poor for the benifit of the overly wealthy, hardly egalitarian, more Tsarist to keep the proles poor?ANd theres a chance the £1M motoe wont be paying much more in VED thatn a £40K, totally wack, could only be dremt up by macheavellian / inept 'government'? And Imoral 'lobbyists'?
So by the end of the year BEV sales may be 4%'ish down on target, hardly "far below" in Auto car or SMMT words. If only Goverments could get this close to predictions and targets.
I think that's the problem. EV registrations below target but with actual sales undeclared. And with so many "used" examples typically being offered at a typical 25% discount, is it any wonder that genuine new models are difficult to sell?
Given this situation (and colossal EV investment the industry has already made) I doubt whether any manufacturer is selling profitably. Yet sell they must in order to shift more profitable ICE models without incurring fines. I think the authorities must either accept that large subsidies will be needed to encourage adoption, otherwise the sales targets must be revised downwards by a substantial amount.
There is no doubt that electric models will eventually prevail, but a swift transition is painful. We have to learn to walk before we can run...
Few corrections, Tesla have made billions in profit and no doubt other compaines too make money out of their BEVs, Renault would be bankrupt if they sold all their BEVs at a loss. Sales targets don't need to changed as they are exactly that, targets! a couple of percentage points down every year is no great shakes.
BEVs get cheaper to make every year and that's the main reason why sales are increasing year on year.
Yes, too pricey, having to stop for Coffee n cake while you charge/ fill up your car's battery won't do my waistline any good either,and I read that EV residuals aren't the best,no, until I have no option I'll be driving something with ICE power.
Have you not heard of a flask and some home made sandwiches Peter?! I NEVER buy overpriced coffee when charging up. As for residuals, you buy second hand like 80% of people do and grab a bargain. If you have your own driveway (and I bet you do) you're crazy not to at least consider one.