UK car sales slump amidst tax changes and electric vehicle challenges

New car sales in the UK fell by over 10 per cent in April, reversing the strong gains seen during March, the month of seasonal number plate changes. The decline is attributed largely to buyers rushing to complete purchases before tax increases came into effect in April, with rises in vehicle excise duty and the introduction of an expensive car supplement for vehicles priced above £40000 hitting consumer budgets.

April registrations totalled 120331, a significant drop from 134274 in the same month last year. This marks the sixth fall in seven months, leaving new registrations 25 per cent lower than pre-pandemic levels. Despite a bumper March helping the year-to-date figures remain 3 per cent higher at 700000, the overall trajectory raises concerns. The Society of Motor Manufacturers and Traders (SMMT) has forecast that new car registrations for 2025 will remain below the two million mark, at 1.964 million, far short of the 2.7 million annual registrations seen a decade ago.

Petrol cars now make up less than half of the market, while diesel sales stand at just over 5 per cent of total registrations. Meanwhile, the government’s push toward electrification appears to be facing hurdles. The appeal of plug-in hybrids has grown significantly, with sales in this segment up 34 per cent in April to 14000 and rising 27 per cent in the first four months of 2025 to 67000. These vehicles now represent nearly 10 per cent of all registrations, offering a lower-cost transitional option for drivers hesitant to fully commit to electric cars.

Pure-electric vehicles have seen far slower growth. April sales increased by just 8 per cent to 24000, with electric cars representing slightly over 20 per cent of the market. While figures for the year so far show stronger growth of 35 per cent to 144000, they remain short of government targets. The zero emission vehicle (ZEV) mandate requires 28 per cent of manufacturers’ sales to be pure electric by 2025, rising to 33 per cent by 2026. However, the SMMT has revised its forecast for 2025, predicting electric vehicles will capture just 23.5 per cent of the market. The 2026 forecast has similarly been lowered to 28 per cent, still leaving a gap of approximately 100000 vehicles below the target.

The SMMT has called for further government support to help manufacturers and consumers meet these ambitious goals, including VAT reductions on electric vehicles, changes to the expensive car supplement for zero-emission cars, and the reduction of taxes on public charging. SMMT Chief Executive Mike Hawes labelled April’s performance as disappointing, underscoring that demand for electric vehicles falls well below expectations despite broader government ambitions.

The situation highlights the delicate balance between policy intervention, cost pressures, and consumer behaviour as the automotive industry navigates a critical transition to electrification in the face of tightening regulations and economic uncertainty.