UK new car market sees decrease in April 2025 following tax changes

In April 2025, the UK new car market saw a significant decline of 10.4%, registering 120,331 units, as reported by the Society of Motor Manufacturers and Traders (SMMT). This drop marks the sixth decrease in the past seven months, highlighting the challenges posed by the current economic climate and diminished consumer confidence.

Various factors contributed to the decline, including the late occurrence of Easter, which resulted in fewer working days, as well as the implementation of changes to the Vehicle Excise Duty (VED) effective from 1 April. One of the notable changes included the introduction of the Expensive Car Supplement, affecting numerous new electric vehicles (EVs), prompting consumers to complete their transactions in March to avoid tax hikes.

Across all sales categories, registrations witnessed a decline, with private purchases decreasing by 7.9%, fleet sales falling by 11.9%, and business demand experiencing a 10.9% drop. Fleet buyers accounted for six out of ten registrations during this period.

While hybrid electric vehicle (HEVs) sales saw a slight decline of 2.9%, petrol and diesel registrations saw more significant drops of 22% and 26.2%, respectively. In contrast, sales of plug-in hybrid vehicles (PHEVs) increased by 34.1%, and battery electric vehicles (BEVs) showed a rise of 8.1%, amounting to 24,558 units and capturing 20.4% of the market. This rise in BEVs can be attributed to manufacturers’ increased focus on offering more affordable models and expanding their electric vehicle offerings, with over 130 BEV models currently available in the market.

As of May 2025, the new car market has seen a 3.1% increase, driven by a significant rise of 35.2% in BEV registrations, pushing their market share to 20.7%. Despite this growth, BEVs still fall short of the 28% market regulation target set for them. The SMMT stresses the need for government incentives to drive a surge in EV volumes, suggesting measures such as reducing VAT on new EV purchases, revising the VED Expensive Car Supplement, and equalizing VAT on public charging with home charging to encourage consumers to transition to electric vehicles.

The SMMT’s latest market forecast for 2025 anticipates 1.964 million new car registrations, with expectations that 2026 will continue to see figures below two million, marking the seventh consecutive year of such projections. The market share predictions for new BEV registrations have been slightly revised downwards, with estimates of 23.5% in 2025 and 28% in 2026, compared to the Zero Emission Vehicle Mandate targets of 28% and 33%.

SMMT chief executive Mike Hawes highlighted the disappointing yet expected performance in April, attributing it to the surge in registrations seen in March. He emphasized the importance of government interventions to support the EV market, noting the industry’s current heavy subsidization of EV uptake and the necessity of a well-rounded incentive package to accelerate consumer adoption of electric vehicles.