UK new car market steady in October, but tax changes threaten growth

The UK new car market held firm in October, rising by 0.5% to 144,948 units, according to figures released today by the Society of Motor Manufacturers and Traders (SMMT). The modest uptick, driven primarily by strong demand for battery electric vehicles (BEVs), keeps the market on track to exceed two million annual registrations for the first time since 2019. However, industry leaders are warning that proposed tax changes could jeopardise that recovery.

Despite overall stability, the composition of the market continues to shift rapidly towards electrification. BEV registrations climbed 23.6% – an additional 7,028 vehicles – securing a 25.4% share of the market, the second highest this year. Plug-in hybrids (PHEVs) rose 27.2% to take 12.1%, while hybrids (HEVs) grew by 2.1% to 13.3%. Together, electrified vehicles accounted for 50.8% of all new registrations, marking the second consecutive month in which they represented the majority of sales.

Fleet registrations dipped by 1.5%, but this was offset by a 2% rise among private buyers. Business registrations surged 32.7%, though this remains a relatively small segment of the overall market.

SMMT’s latest quarterly outlook projects that total new car registrations in 2025 will reach 2.012 million units, up from 1.9 million last year, marking the first time since before the pandemic that the market will surpass the two-million mark. BEVs are expected to account for 23.3% of sales next year, rising to 28.2% in 2026.

However, even those gains fall short of the government’s Zero Emission Vehicle (ZEV) Mandate, which requires one in three new cars sold in 2026 to be fully electric. The gap is forecast to widen further in 2027, when BEVs are predicted to reach 32.2% of sales, below the 38% target.

The sector’s cautious optimism could be short-lived. The SMMT has warned that government plans to scrap Employee Car Ownership Schemes (ECOS), by making them subject to company car tax, would seriously damage market growth and undermine progress toward electrification.

Roughly 100,000 vehicles are supplied through ECOS each year, accounting for about 5% of annual new car sales. Abolishing the schemes would, according to SMMT estimates, result in an 80,000-unit drop in new registrations, cost the industry more than £1 billion in lost revenue, and eliminate around 5,000 manufacturing jobs. The Treasury, meanwhile, would forfeit an estimated £500 million in VAT and Vehicle Excise Duty receipts – more than double the cost of the government’s Electric Car Grant.

“But scrapping ECOS would undermine that progress – penalising workers, reducing Exchequer income and putting green investment at risk. At a time when the Budget should fuel growth, the measure will do the exact opposite. It is time for a rethink.”