David Borland, EY UK & Ireland automotive leader, on the latest new car registration figures and the challenges for 2025 of ensuring the EV transition.

David Borland, EY’s UK&I automotive leader

In contrast to the growth period for UK new car registrations during the first seven months of 2024, last year ended on a downward trajectory, with year-on-year declines in each month of the last quarter.

New car sales declined marginally by 0.2% year-on-year in December, marking a fourth and final fall of 2024. This resulted in an overall increase for the year of 2.6% and a total of 1.953 million sales.

The key reasons behind last month’s fall in registrations mirrored the challenges that have faced the UK’s automotive sector throughout the year, including a challenging regulatory environment, increasing competition and costs, and changing consumer needs. Retail sales were down once more, with a 1.7% decline. Meanwhile, fleet sales bounced back from November’s marginal decline, returning to growth and continuing to show signs of resilience, with a modest increase of 0.2%. Fleet saw a total market share of 59.6% in 2024, comfortably outstripping 38.2% for retail. This underscores how crucial fleet has been in recent times to the automotive sector’s performance, albeit fleet is a less profitable channel in comparison to retail.

The zero emission vehicle (ZEV) mandate continues to be one of the most marked challenges facing manufacturers. Battery electric vehicle (BEV) market share stood at 19.6% across the course of 2024, continuing to trail behind the 22% ZEV mandate target. This was despite BEV sales increasing once again in December, with 56.8% growth, in contrast to petrol and diesel sales, which saw declines of 20.9% and 27.4% respectively last month. The changes are a sign of how manufacturers balanced their overall exposure to penalties for ZEV Mmndate non-compliance, whilst also offering incentives for BEVs.

The combined total market share of BEVs and plug-in hybrid electric vehicles (PHEVs) in December reached 40% for the first time, representing a positive sign for charge point operators around the prospects of their investments paying off as the transition continues.

The ZEV mandate target is also due to increase to 28% in 2025, ramping up the challenge facing manufacturers to boost EV sales. Meanwhile, BEVs are also expected to be subject to an additional £425 per annum in vehicle excise duty from April, which could pose further stumbling blocks to consumer demand.

However, with the government consultation now seeking views on the phase out of internal combustion engine (ICE) sales from 2030 and updates to the ZEV mandate, there is potential to provide crucial support to the automotive industry’s forward-looking prospects, although how much can be delivered in 2025 remains to be seen.

Regulatory compliance, improving consumer sentiment around EVs and boosting retail demand will likely be among manufacturers’ top priorities for the year ahead. Furthermore, the emergence of Chinese manufacturers and their electric vehicle offerings in the UK will further develop this year, which is expected to increase the availability of competitively priced BEVs. This could provide a welcome boost to the retail sector but will undoubtedly pose challenges to existing manufacturers in the market as the level of competition intensifies.

In summary, the challenge of ensuring the EV transition is sustainably profitable will require manufacturers to align their supply, operational footprint and product portfolio along with demand. Indeed, different consumer needs will need to be met, which may require financial support from both the public and private sectors to aid the UK’s EV transition.

Overall, it will be critical for policymakers, manufacturers, dealers, charge point operators, energy providers and other key players in the automotive ecosystem to collaborate closely in 2025 in a bid to alleviate some of the industry’s most pressing ongoing challenges.

Value propositions offered to consumers and EV infrastructure have significant room for improvement which, if addressed, could unlock significant untapped BEV sales growth. However, given the persistent headwinds facing the UK’s EV transition, the road ahead remains complex.