26 June 2025
Following the release of a new UK industrial strategy, the SMMT International Automotive Summit discussed the impact on carmakers. Autovista24 special content editor Phil Curry rounds up the key talking points.
In previous years, the SMMT International Automotive Summit was dominated by talks surrounding one large challenge. This year, several issues dominated discussion at the event. This ranged from a new industrial strategy to international trade, and zero-emission vehicles (ZEVs).
The UK’s automotive industry finds itself in geopolitical crosswinds. A deal with the US has seen more favourable tariff terms compared to other markets. Meanwhile, the country remains more open to Chinese carmakers, with some now firmly established in the market.
There is also a push for increased sustainability. This extends beyond the tailpipe to the components and manufacturing methods employed in vehicle building. Meanwhile, the ZEV mandate and the 2030 ban on petrol and diesel new-car sales could create issues for UK carmakers.
However, in the days before the summit, the UK government announced a new industrial strategy, backing the automotive industry. This steered much of the discussion at the event. It recognised the sector’s contribution to the country’s economy, and its approach has been welcomed by the SMMT.
Automotive industry leads
The UK has faced a prolonged period of political uncertainty. Since the Brexit referendum in 2016, there has been notable instability. This has included changes in prime ministers and policies. Uncertainty was in no short supply. However, since the general election last year, the country’s political landscape seems to have settled.
‘Looking more broadly, the UK has undoubtedly re-established political stability, which gives us an advantage. I mean, for many, many years we had political instability, which made it much harder to put the UK on investment maps,’ SMMT chief executive Mike Hawes told the conference.
Yet despite this positive, the country is grappling with some domestic challenges.
‘Electricity costs remain, as we speak, the highest in the world,’ he said. ‘Internationally, we are worse for business rates, and among the worst for the burden of government regulation for capital allowances.
‘With the international conditions causing problems beyond our control, it makes sense to ease the burdens we do control. That means a whole government approach to competitiveness,’ Hawes continued.
With this in mind, the government’s industrial strategy was welcomed by the industry body: ‘You will see it focuses on advanced manufacturing as one of the growth sectors, and automotive is mentioned throughout, highlighting our importance to economic growth, high-value jobs and wealth,’ he said.
The strategy highlights the growth potential of the automotive sector, which means it will be prioritised as a manufacturing industry. At the same time, the government aims to reduce electricity costs for those using the most power, including vehicle manufacturing.
There is also a plan to strengthen supply chains and drive innovation. £2.5 billion (€2.93 billion) will be offered in capital and research and development (R&D) funding via the Drive35 initiative.
Political viewpoint
‘This industrial strategy is an ambitious 10-year plan to kick-start an era of economic prosperity,’ stated Johnathon Reynolds MP, UK secretary of state for business and trade.
‘But the strategy is also a sign of how we are changing the rules of the game,’ he said. ‘We need an approach where the UK rises to meet the demands of the decade ahead, instead of trying to play catch-up.’
‘Our Advanced Manufacturing Sector Plan sets out how the UK will solidify itself as the best place in the world to start, to grow and to invest in advanced manufacturing. In practice that means an ambition to nearly double the annual business investment in a sector by 2035. And in an automotive context, that means growing our output to over 1.3 million vehicles by 2035.’
Manufacturer costs
Reynolds also addressed the costs manufacturers currently face. ‘From 2027, the new British Industrial Competitiveness Scheme will reduce electricity costs by up to £40 per megawatt-hour for over 7,000 electricity-intensive businesses in manufacturing, many of them within our automotive sector.
‘We will do this without any increase in bills for any other business or for households or for rising taxes to pay for it,’ he said.
However, the issue of energy costs was met with scepticism from some. ‘Energy costs are the number one issue of competitiveness for many in our union. The news on the plans for 2027 is welcome, but there will be little benefit from it,’ commented Steve Turner, assistant general secretary, manufacturing, at Unite the Union.
‘Depending on volumes, that will save around €15 to €20 per vehicle. The national insurance changes introduced earlier in this government added €250 per vehicle. So you must do something about the price of energy.
‘If you are going to be competitive, especially in terms of new technologies, such as battery development, we need more. Who would invest in the UK if the energy costs were disproportionate?’ Turner questioned.
SMMT calls for more
The SMMT recently published a new report outlining its ambitions for the UK automotive industry. These include returning the UK to the top 15 global automotive manufacturing locations, introducing purchase incentives for ZEVs, and mandating the delivery of public charging and refuelling infrastructure.
It also outlined a desire to create a new-car market of over 2.2 million units. This volume has not been achieved since before the COVID-19 pandemic.
‘Our ambition to transition to zero-emission mobility, one that is shared with government, will see cars and vans increasingly decarbonised to 2035 and heavy-goods vehicles (HGVs) thereafter,’ Hawes wrote in the report’s introduction.
‘But the path to that ambition is paved with obstacles. Tariffs and trade protectionism have fundamentally altered the global trading environment, economic uncertainty stifles growth and consumer affordability, and thus, demand is constrained.
‘However, UK automotive’s role as a key driver of net zero and economic success remains certain. Our sector directly contributes more than £25 billion in value to the economy and more than £44 billion worth of exports annually, while employing nearly 800,000 people,’ outlined Hawes.
‘We inspire innovation, with 23 R&D and nine design centres, mastering the technologies of the future.
‘We are driving the zero-emission transition, having put more than a million zero-emission vehicles on the road in the past five years despite a reticent market,’ Hawes added.
Trading up in UK
Earlier this year, the US imposed tariffs on many goods entering the country, including vehicles. Then at the start of May, the UK agreed terms for reduced tariffs of 10% on exports to the US. This leaves other European countries subject to higher rates, putting the UK in a more advantageous position.
‘The UK was the first, and so far only, country to get a deal, and automotive is very much at the forefront of that deal. As we know with Donald Trump, automotive is a sensitive sector. So, we do not underestimate just how challenging and how successful the talks have been in that regard,’ stated Hawes.
‘These talks have brought us away from the worst of tariffs. It takes a 27.5% tariff down to 10%, which increasingly seems to be the new normal with this administration. We hope all those deals, though, are foundations, and are floors rather than ceilings,’ he added.
Opportunity from China
China also presents an increased opportunity for the UK. Several Chinese carmakers, including BYD, Chery, SAIC, and Xpeng, have entered the market in recent years. This increases the opportunity for localised investment.
‘If you look at automotive history, Chinese brands have been coming in the last two or three years, and more are coming. Localisation is something that we should do, so this is why I always say this is an open topic,’ Victor Zhang, UK country director for Omoda and Jaecoo UK told the audience.
‘We have been in talks with relevant parties, so I think other Chinese companies are also considering this. I think it is only a matter of time before we hear more news on manufacturing growth from China.’
Sir Sherard Cowper-Coles, chair of the China-Britain Business Council (CBBC), also spoke about the trading relationship between the two countries.
‘Asia is where the growth is, not just in terms of exports but in terms of investment,’ he said.’ Britain does as much trade with Hong Kong as we do with Japan. We get four and a half times the investment from China through Hong Kong as we get from the EU, so we have to engage.
‘There are 40 gigafactories in China for batteries, only one in the UK. We know through the CBBC that Chinese investors, partly because of US policy, partly because they like the UK, are looking for partners here,’ Cowper-Coles added.
UK-EU relationship remains strained
While things look better for the UK’s relationship with the US and China, things do not appear as positive with the EU.
‘I suspect it is going to be very hard to make progress with the European Union going forward,’ commented Anand Menon, director of UK in a Changing Europe.
‘Despite the good intentions at the recent UK-EU Summit, and the warmth towards Prime Minister Kier Starmer, the fact remains that for many in the European Union, the UK is not a priority. Many also do not particularly want to see Brexit work,’
‘So, it is an open question for me whether or not the summit was a building block to something bigger in the future. Or the summit has taken us to somewhere near an equilibrium when it comes to economics. This could mean that we are not going to shift from this position very far in the future,’ he added.
ZEV worries continue
According to Hawes, carmakers have offered ZEV incentives exceeding £6.5 billion since the mandate’s introduction at the beginning of 2024.
‘This level of discounting is unsustainable. The government has acted on the ZEV mandate, tweaking it to remove some of the burden on the industry. But consumer confidence in these new technologies is still not there. We would seek still more incentives, for the private consumer from the government. But what we are getting is disincentives,’ Hawes stated.
In recent months, battery-electric vehicles (BEVs) have been required to pay vehicle excise duty each year. They are also now eligible for the expensive car supplement, increasing tax if a vehicle is sold for more than £40,000.
UK needs incentives
Yet BEVs are becoming more affordable, with cheaper options available to drivers. ‘The Skoda Elroq, for example, was the number one selling electric vehicle in Europe in April, and in the UK that has a price point of around £31,000,’ commented Damien O’Sullivan, managing director of Volkswagen Group UK.
‘So you have cars now that are becoming more affordable, but there is still a big gap in terms of retail buyers being able to access electric vehicles.’
‘We see the growth more in fleet than in retail, so we badly need stimulus for retail buyers to come and buy electric vehicles (EVs). If you look at Norway, for example, which is the leader in terms of the adoption of EVs, the country put incentives in place, in terms of much lower tax rates, and exclusion entirely of VAT rates.
‘Whether the UK government is in a position to go that far with the current economic situation is questionable, but certainly offering incentives for customers to make the change and make the switch. They also need to look at incentivising charging infrastructure to have more points available.
‘The alternative is what we are seeing right now. Drivers are postponing changing a vehicle at all. So we have an older fleet of cars on the roads instead of having a fresher fleet of EVs,’ O’Sullivan commented.
Questions ahead for luxury carmakers
Banning the sale of new petrol and diesel car sales by 2030 could also prove troublesome, especially for luxury brands.
‘I really hope the ZEV mandate, and the planned ban, does not change. If we know what is happening, we can plan. It takes five years to develop a car, and if changes are implemented two years down the line, it is impossible to go back,’ highlighted Adrian Hallmark, CEO of Aston Martin.
‘So, stability in that is important. But if you take the outlook, some countries are banning petrol and diesel new car sales in 2030, others in 2035, more in 2040, around the world. Other countries are not implementing a ban yet,’ he added.
This could leave Aston Martin in a difficult situation, especially with many of its cars destined for export.
‘If we export 90% of our production, and the UK is the first to switch off engines, then we must decide,’ affirmed Hallmark. ‘Do we go fully electric and risk the 90% exports? Or withdraw from the UK market and give up the 10% we produce for the domestic market? Or do we try and hang on to both and bear the cost of that for as long as possible?
‘Over that time window, we face major challenges in knowing when to launch which technologies and to have a market that is ready for them. So we believe in electrification. Our customers are not yet at the same level of adoption as some of the volume manufacturers,’ Hallmark concluded.
