New car registrations stall in July but recovery expected

New car registrations in the UK dropped -5.0% in July to 140,154 units, marking the weakest July performance since 2022 and underscoring the continued volatility of the automotive market amid wider economic uncertainty. According to new data from the Society of Motor Manufacturers and Traders (SMMT), the sector remains -10.8% down compared to pre-pandemic levels in 2019.

Registrations from both private and fleet buyers fell -3.2% and -6.5% respectively, with 51,646 private vehicles and 85,594 fleet vehicles registered. Business registrations were a rare bright spot, rising 10.4% to 2,914 units.

Only a few vehicle segments defied the downturn. Dual Purpose (+13.9%), Mini (+14.7%), and Luxury Saloons (+114.6%) recorded growth, while most other segments saw declines.

Electrified vehicles outperformed the broader market, with plug-in hybrid electric vehicles (PHEVs) surging 33.0% and battery electric vehicles (BEVs) climbing 9.1% year-on-year. However, BEV growth in July was subdued compared to the 34.6% increase seen in the first half of 2025, making it the second-weakest month for BEVs this year following April’s tax shake-up.

A key factor holding back BEV momentum according to the SMMT appears to be uncertainty over the Government’s newly introduced Electric Car Grant (ECG). The scheme, which promises up to £3,750 off qualifying vehicles, has yet to confirm eligible models – prompting some prospective buyers to delay purchases. BEVs secured a 21.3% market share in July, up from 18.5% in the same month last year, but still below the 28% target set by the Zero Emission Vehicle (ZEV) Mandate.

Industry leaders continue to warn that insufficient consumer incentives and costly fiscal measures, such as the Expensive Car Supplement (ECS) on Vehicle Excise Duty – estimated to cost BEV buyers over £360 million this year – are dampening demand. They argue that increased support for private BEV buyers is essential to accelerate uptake, meet climate goals, and boost the UK’s automotive sector.

Sales of hybrid electric vehicles (HEVs) fell -10.0% to 18,551 units, while combined petrol and diesel registrations plummeted -14.0% to 74,289 units, though they still made up 53.0% of July’s market.

Despite the dip in July, the year-to-date market remains resilient, up 2.4% with 1.18 million vehicles registered so far in 2025 — including over 250,000 BEVs. Looking ahead, the SMMT has revised its annual forecast slightly upward to 1.9 million units, with BEVs expected to represent 23.8% of total sales — reflecting cautious optimism about a recovery.

Mike Hawes, Chief Executive of the SMMT, said: “July’s dip shows yet again the new car market’s sensitivity to external factors, and the pressing need for consumer certainty.

“Confirming which models qualify for the new EV grant, alongside compelling manufacturer discounts on a huge choice of exciting new vehicles, should send a strong signal to buyers that now is the time to switch. That would mean increased demand for the rest of this year and into next, which is good news for the industry, car buyers and our environmental ambitions.”

John Cassidy, Director of Sales at Close Brothers Motor Finance, echoed the cautious optimism: “Despite a slight dip in new registrations, there’s cause for optimism.

“EVs are increasingly grabbing a larger share as private demand finally begins to rise. The return of grants for new EVs should tempt even more consumers to make the switch.”

However, Cassidy warned that incentives alone are not enough: “The Government must match this incentive with strong investment in the UK’s charging infrastructure to make sure it can handle widespread adoption, which remains a key barrier holding many consumers back.”