UK vehicle production is expected to return to growth in 2026, with output forecast to rise by more than 10% to around 790,000 units, according to the Society of Motor Manufacturers and Traders (SMMT).
The trade body said overall light vehicle production is anticipated to reach 824,000 units this year, and could climb to one million units by 2027 if new model launches remain on track and the right market conditions are in place.
SMMT said the recovery outlook comes as significant public and private investment has already been committed to the UK’s electric vehicle transition, including the government’s £4 billion DRIVE35 programme launched as part of its Modern Industrial Strategy.
However, it warned that meeting the strategy’s ambition for UK automotive production to exceed 1.3 million units a year by 2035 will depend on the delivery of key commitments.
These include action to reduce high energy costs, ensuring the whole sector qualifies for the British Industrial Competitiveness Scheme, additional support for the UK supply chain and the creation of a strong, sustainable domestic market.
SMMT stressed that manufacturers and suppliers typically build close to where they sell, making new vehicle demand in the UK a critical factor.
The forecast rebound follows a sharp fall in production in 2025. UK vehicle output declined 15.5% last year to 764,715 units, comprising 717,371 cars and 47,344 commercial vehicles. Car production fell 8.0% while commercial vehicle output dropped 62.3%.
SMMT said volumes were constrained by several factors, including a cyber incident that stopped production at Jaguar Land Rover, new tariffs affecting trade across the Atlantic, the consolidation of two commercial vehicle plants into one, and ongoing restructuring as factories transition towards a decarbonised future.
Despite the overall downturn, production of electrified cars increased. Output of battery electric, plug-in hybrid and hybrid models rose 8.3% to a combined 298,813 units, representing a record 41.7% share of total car production.
SMMT said growth is expected to continue this year, supported by the start of next-generation volume electric car production in Sunderland and the planned launch of seven new EV models across the UK.
Exports to key markets also declined. Europe received 56.7% of vehicles shipped overseas, followed by the US at 15.0% and China at 6.3%. Exports to each market fell by 3.3%, 18.3% and 12.5% respectively, with shipments to the US affected by tariff uncertainty earlier in 2025. Turkey and Japan completed the top five export markets, followed by Canada, Australia, South Korea, Switzerland and the UAE.
Trade policy will also be central, it said, given the industry’s reliance on exports. Europe remains the UK’s biggest automotive export market and the largest source of imported vehicles and components, so tariff-free trade and market access must be protected despite an upcoming change to Rules of Origin requirements under the Brexit deal and increasingly protectionist ‘Made in Europe’ proposals from the European Commission.
SMMT also highlighted the importance of maintaining certainty in transatlantic trade because of the role of US exports, particularly for small-volume, high-value manufacturers, while urging that the benefits of new agreements with South Korea and India are realised. It added that the UK must continue to promote the sector’s expertise and capability to global investors and customers.
Mike Hawes, SMMT chief executive, said: “2025 was the toughest year in a generation for UK vehicle manufacturing. Structural changes, new trade barriers, and a cyber attack that stopped production at one of the UK’s most important manufacturers combined to constrain output, but the outlook for 2026 is one of recovery.
“The launch of a raft of new, increasingly electric, models and an improving economic outlook in key markets augur well. The key to long term growth, however, is the creation of the right competitive conditions for investment; reduced energy costs; the avoidance of new trade barriers; and a healthy, sustainable domestic market. Government has set out how it will back the sector with its Industrial and Trade strategies, and 2026 must be a year of delivery.”