The hard work must continue at dealerships up and down the UK in 2026 to manage stock, aftersales and customer retention effectively while OEMs remain quietly nervous about the fragile recovery of the new car market, says Jacqui Barker, global OEM strategy director at Keyloop.
January is planning season. Boards are signing off targets, OEMs are issuing carefully worded outlooks, and retailers are trying to square macro-economic anxiety with some surprisingly decent end-of-year numbers. Let’s start with the facts:
According to the SMMT, new car registrations reached 2.02 million in the UK in 2025. That’s up 3.5% year-on-year; the third consecutive year of growth, and the first time we’ve been back over two million since before the pandemic.
Nearly one in four of those new cars was a battery electric vehicle (BEV), with around 473,000 BEVs registered, even as internal combustion still accounted for just over half of the market (SMMT).
In used, Auto Trader reports that the market ended 2025 in a stable, slightly growing position: retail prices broadly steady, cars selling quickly and used sales volumes around 2% up on the prior year, with used EV sales up by roughly 52% and EVs the fastest-selling fuel type (AutoTrader).
Zoom out to Europe and you see a similar picture: low single-digit growth in new registrations (around 1.9% year-on-year) but volumes still below pre-COVID peaks (ACEA).
So yes, if you only look at the top line, the industry finished 2025 looking healthier than many feared 12 months ago.
Recovery, or just a different kind of risk?
Talk to OEMs, though, and very few are using the word ‘boom’. The tone is more ‘fragile recovery’ or even ‘reset with uncertainty baked in.’
Three themes keep coming up in those boardroom conversations:
1) The EV ambition gap
The UK new car market did its bit for decarbonisation last year, but not quite enough for policymakers. With BEVs at 23-24% share versus a 28% Zero Emission Vehicle (ZEV) mandate target, there’s a clear “gap between demand and ambition”, according to the SMMT. But it seems as though OEMs are quietly nervous: they’ve loaded in heavy discounting (average EV incentives north of £10k in some segments) and still worry about what happens when that support unwinds.
2) Chinese brands and trade uncertainty
In Britain, Chinese-owned brands almost doubled share in 2025, to around 9-10% of the market, helped by the UK’s lack of the EV import tariffs now hitting rivals in the EU and US. That’s a fantastic source of new product and price competition in the short term, but every strategic conversation includes a caveat: What if UK policy aligns with Europe later? No one wants to build a volume strategy on shifting sand.
3) The consumer’s cost-of-living hangover
Interest rates may have peaked, but the damage to affordability is real. Housing is stagnant, household budgets are still under pressure, and many buyers are stretching terms rather than stretching up a segment. Globally, analysts like S&P Global and Cox Automotive talk about “mixed trends” and a “slowing but still good” market into 2026 – modest volume, but with margin pressure and high sensitivity to price and monthly payment.
Put simply: the numbers say “recovery”, but the risk register says “don’t get carried away”.
Where does that leave retailers?
Dealerships won’t be reading this through the lense of macro-charts and market megatrends, though. For retailers, it’s all about experience of stock, staff and customers.
A few key trends from 2025 feel particularly important as you set the wheels in motion for 2026:
1) Used car sales are still your shock absorber. With new back over two million but not yet roaring, the used car market remains the profit stabiliser. Q3 2025 saw over 2 million used cars change hands, up 2.8% year-on-year, and engagement on marketplaces is close to record levels (AutoTrader). The twist is how quickly used EVs are now turning when the price and provenance are right. That puts a premium on battery health transparency, smart valuations and OEM-backed approved programmes rather than “winging it” on EV residuals.
2) The technician bottleneck continues. All of this would be manageable if labour supply were stable. It isn’t. Motor trades vacancy rates remain above the national average, with the Institute of the Motor Industry estimating around 17-19,000 vacancies across the sector at any given time, disproportionately weighted towards technical roles. EV and software complexity widen that gap. Around a quarter of technicians now hold an EV qualification; IMI forecasts a shortfall that gets materially worse through the next decade if training and retention do not accelerate.
3) Electrified, not just electric. While BEVs grabbed the headlines, hybrids and plug-in hybrids quietly did a lot of the heavy lifting in volume and share across Europe, according to ACEA. Forward-thinking retailers are building propositions for electrified households, not just BEV buyers: helping customers choose between BEV, PHEV and HEV based on their real-world use, charging access and budget.
4) Supply has normalised and now the hard work starts. With supply constraints largely behind us, we’re back to a more ‘normal’ market where product alone doesn’t guarantee demand. That shifts the focus squarely onto the quality of your digital journeys, how well your showroom experience joins up with online and whether you’re using data from DMS, CRM and marketing platforms to talk to the right customers at the right moment.
5) Aftersales is the real loyalty engine. In a world where customers are nervous and switching brands, aftersales is still where you earn the right to the next sale. The used and EV stats from 2025 only underline that: buyers are looking for confidence on total cost of ownership, repairability and software updates as much as they’re looking for a deal on day one. Workshops that are efficient, transparent and digitally connected will win disproportionate loyalty.
So, what’s the 2026 mantra?
If 2020-2023 was about firefighting through pandemics and supply chain shocks and 2024-25 was about rebuilding volume, then 2026 looks like the year of disciplined growth.
The world may feel unstable, but the fundamentals of trust, service and execution haven’t changed. Two million registrations gives the UK market something solid to build on.
Whether 2026 feels like recovery or uncertainty will depend less on what happens in Westminster and more on how well OEMs and retailers turn those numbers into long-term, loyal customer relationships.
Author: Jacqui Barker, global OEM strategy director, Keyloop