The UK’s new car market showed signs of tentative recovery in May, with registrations rising 1.6% year-on-year, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).
May’s figures offer cautious encouragement to an industry under pressure. Strong fleet activity and rising EV interest are promising, but long-term recovery depends on reviving private buyer confidence and aligning public policy with market reality.
The modest uplift – just under 30,000 additional vehicles – has prompted guarded optimism across the industry, tempered by the persistent uncertainty facing private buyers and the challenge of meeting electric vehicle (EV) adoption targets.
James Hosking, managing director of AA Cars, summed up the mood: “The UK’s new car market delivered a solid performance in May buyers are slowly regaining confidence, aided by lower interest rates and attractive new car offers.”
Hosking pointed to a combination of factors fuelling demand – pent-up appetite from earlier in the year, a robust showing from fleet buyers, and the seasonal boost of the new 25-plate registrations. “These often combine to lift sales around this time of year, particularly for company cars and business fleets looking to take advantage of tax efficiencies.”
Yet even with these tailwinds, private buyers remain cautious. “The gradual improvement in borrowing conditions is helping to reduce monthly finance costs,” he noted. “It’s a fragile recovery, but a recovery nonetheless.”
EV momentum building
EV sales provided a key source of growth in May, with Battery Electric Vehicle (BEV) registrations up 25.8% year-on-year. But while the rise is encouraging, it still falls short of what’s required under the UK Government’s Zero Emission Vehicle (ZEV) Mandate, which sets a 28% target for BEV market share this year.
David Borland, EY UK & Ireland automotive leader, described the figures as “a welcome boost in the context of challenging market conditions,” but noted that BEVs currently make up just 21.8% of new car sales. “The ZEV Mandate is still the elephant in the room,” he warned.
The industry is well aware of the gap. Philip Nothard, insight director at Cox Automotive, said: “Consumers continue to face economic uncertainty and the current rate of electric adoption still lags behind the ZEV mandate target.”
Chinese brands and cost trends
Despite the challenges, signs of genuine consumer interest in EVs are emerging – particularly among cost-conscious and tech-savvy drivers.
Philipp Sayler von Amende, chief commercial officer at Get Your Car, reported a sharp 77% rise in BEV enquiries on Carwow in May, calling it “serious growth.” He noted a growing appetite for new cars in the £30,000–£50,000 range, adding: “While value is still a key factor for many, the data hints that a significant proportion of drivers are open to investing a bit more.”
He said Chinese manufacturers are a major force behind this shift with the Jaecoo 7 emerging as the most-configured car on Carwow last month while BYD’s Seal and Seal U were among the site’s top five most-viewed reviews.
James Hosking added that affordability is quietly improving: “Our data shows a 10% drop in the average price of the 20 most-searched-for EVs and hybrids on the AA Cars platform in Q1 2025.” Still, he acknowledged that EVs remain “a niche choice” for many and that “greater support is still needed” to push them into the mainstream.
PHEVs gain traction
While full-electric models garner the headlines, plug-in hybrid electric vehicles (PHEVs) are also quietly surging. According to EY’s Borland, SMMT figures showed that PHEV sales rose by more than 50% year-on-year in May, buoyed by recent adjustments to the ZEV Mandate that favour their inclusion. Hybrids also posted a more modest 6.8% rise.
This diversified demand reflects a consumer base still in transition – balancing cost, convenience, and concerns about EV infrastructure. As Hosking put it: “Concerns about charging access and range anxiety continue to hold some buyers back.”
Retail market remains soft
Despite the overall rise in registrations, many observers warn that the market’s underlying fragility cannot be ignored – especially in the private sales channel.
Maria Bengtsson, EY UK & Ireland mobility leader, flagged this as a central concern: “Persistently declining retail sales continue to have a greater impact on profitability. This channel should be a critical priority.”
May saw another dip in retail sales, down 2.3% year-on-year, according to the SMMT figures with Bengtsson warning that with “a subdued economic outlook, a changing regulatory environment and uncertainty around the EV transition,” the options to reverse the trend are limited – unless industry and policymakers act together.
Across the board, there was consensus that public policy must evolve to keep pace with market dynamics. As Hosking warned: “Meeting the Government’s Zero Emission Vehicle mandate will hinge not only on vehicle supply, but on building sustained consumer demand.” He called for clear public messaging, meaningful incentives, and ongoing investment in charging infrastructure.
John Cassidy of Close Brothers Motor Finance agreed, warning that “any further measures which could deter potential EV buyers” should be avoided if the government hopes to reach its targets.
Ian Plummer of Auto Trader highlighted the positive signs, however, noting that “around one in four of all new cars viewed on our website is electric.” He believes momentum is real, driven by more affordable models and growing consumer awareness: “When the price is right, drivers are keen to make the switch.”
As Philip Nothard put it: “The uplift in May registrations is a positive signal but questions remain about how long the fleet sector can continue to prop up the recovery.”