The UK’s automotive industry has called for immediate government action to protect investment, jobs and international competitiveness, warning that current electric vehicle (EV) sales targets and looming trade barriers with Europe threaten the future of one of Britain’s most valuable manufacturing sectors.
Speaking at the Society of Motor Manufacturers and Traders’ (SMMT) International Automotive Summit in London, SMMT Chief Executive Mike Hawes said the government’s Modern Industrial Strategy had laid important foundations but warned that swift policy action is now needed to ensure the sector can deliver on growth, decarbonisation and investment ambitions.
The trade body published its latest State of the Automotive Nation report alongside its second UK Automotive Business Leaders Barometer, outlining what it describes as a blueprint for the next Prime Minister to secure the industry’s long-term future.
While welcoming recent government support—including £4bn through the DRIVE35 programme, measures to reduce industrial electricity costs, new international trade agreements, EV purchase incentives and legislation supporting autonomous vehicles—the report argues that three critical challenges now require urgent attention.
Foremost among them is reform of the Zero Emission Vehicle (ZEV) Mandate, which the SMMT says is outpacing consumer demand despite manufacturers investing billions of pounds in new electric vehicle technologies.
According to the Business Leaders Barometer, every automotive industry leader surveyed believes the UK is behind the trajectory needed to meet the 2030 phase-out of new petrol and diesel car sales, with almost three-quarters (73.8%) saying the country is significantly behind schedule.
The challenge is expected to intensify from January 2027, when manufacturers must ensure 38% of new car sales and 34% of new van sales are battery electric vehicles (BEVs). Those targets rise further in 2028 to 52% for cars and 46% for vans. Current market shares stand at 23.9% for cars and just 9.5% for vans.
The SMMT claims manufacturers have already spent more than £12bn subsidising EV sales through discounts to stimulate demand, arguing that continued market intervention at this scale diverts investment away from future vehicle development, manufacturing and employment.
Alongside domestic regulatory concerns, the industry is also warning of growing threats to UK-EU automotive trade.
The report highlights proposed “Made in Europe” procurement rules from the European Commission, which it says could leave UK-built automotive products at a competitive disadvantage unless Britain secures recognition for UK vehicles assembled using integrated European supply chains.
At the same time, stricter rules of origin under the EU-UK Trade and Cooperation Agreement are due to take effect from January 2027. Without a revised agreement, the SMMT estimates a 10% tariff could apply to around 70% of battery electric and plug-in hybrid vehicles traded between the UK and EU, creating an estimated £1.4bn tariff burden in 2027 alone and putting approximately £16.4bn of cross-Channel EV trade at risk.
Domestic cost pressures continue to weigh heavily on manufacturers as well.
More than 93% of automotive business leaders surveyed reported worsening employment costs over the past year, while almost 85% said input costs had increased. Although the government’s British Industrial Competitiveness Scheme will provide some relief, seven in 10 respondents said further reductions in industrial energy costs would deliver the greatest benefit to their businesses, with UK electricity prices remaining substantially higher than many European competitors.
UK Automotive can drive growth, innovation and net zero, but only if the right decisions are taken now.
The Industrial Strategy sets out a plan, but delivery is now what matters. We need open trade with Europe, competitive conditions at home, and a realistic route to grow zero emission vehicle uptake.
Reforming the ZEV Mandate is not about weakening ambition; it is about making the transition achievable, protecting investment and ensuring the UK remains a place where automotive businesses can build, sell, export and grow. The window for action is closing, which means we cannot wait for lengthy discussions.
Mike Hawes, Chief Executive of the SMMT
The SMMT argues that addressing these issues would support the government’s ambition of producing 1.3 million vehicles annually while strengthening an automotive sector that already supports 188,000 manufacturing jobs and contributes more than £110bn in annual imports and exports.
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