Britain’s factories built 385,979 vehicles in the first half of 2026, and the industry says the next round of model investment hinges on energy costs and ZEV Mandate reform.

UK vehicle production fell 7.5% across the first six months of 2026, with 385,979 cars and commercial vehicles leaving factory gates, according to figures published today by the Society of Motor Manufacturers and Traders. The headline number masks a rather more encouraging second quarter, however, in which output dipped by just 128 units, or 0.1%, year on year.

That near flat Q2 came courtesy of stronger exports and a return to marginal growth for car production. Overseas shipments rose by 5,075 units (3.9%) in the quarter, and June was better still: car exports climbed for a third consecutive month, up 4.5%, while commercial vehicle exports leapt 54.3% from a notably weak base. Total June output eased by only 1.2% to 68,200 units.

Across the half, exports reached 294,222 units, down 5.6%, while production for British buyers took the heavier hit, sliding 13.2% to 91,757 units.

Exports now account for 76.2% of everything built here, which explains why trade policy dominates the industry’s wish list. The EU remains the biggest customer by some distance, taking 58.3% of car shipments at 166,801 units, up 3.4% year on year. The US followed with 45,162 units, or 15.8% of exports, though volumes slipped 4.6%. China, in third, took 12,323 units, down 44.7% on H1 2025.

Electrified cars made up roughly four in 10 cars built in the period, but output was 8.6% down on last year as several manufacturers worked through model changeovers.

Flat this year, growth pencilled in for 2027

The latest independent outlook expects total UK car and light vehicle production to finish 2026 broadly flat at 740,000 units, before returning to growth in 2027. The industry’s long held ambition of passing one million units remains alive, but it would take roughly 40% growth and a fresh wave of model investment to get there.

With those investment decisions being taken now, and a new government in place, SMMT wants the Modern Industrial Strategy delivered at pace. Top of the list is electricity, where UK industrial prices remain uncompetitive even after the British Industrial Competitiveness Scheme cut bills for more than 10,000 manufacturers.

Reform of the ZEV Mandate is the other priority. Manufacturers are pouring billions into zero emission technology, but SMMT argues regulation is running ahead of consumer demand, making the cost of selling in the UK untenable and weakening the case for building cars here. It is a theme the trade body has pressed hard since calling for an urgent review of the mandate’s targets earlier this year, following the relaxation of the rules announced in response to US tariffs.

Trade with Europe is the third pressure point, with ‘Made in Europe’ and Rules of Origin issues under the TCA threatening cross-Channel supply chains and, left unresolved, an €80 billion-a-year trading relationship.

Mike Hawes, SMMT Chief Executive, said, “Global vehicle production remains under intense pressure, and the UK is no exception. Global market weakness, trade pressures and uncompetitive costs are taking their toll. But decline is not inevitable. Urgent action on energy costs, reform of market regulation and improved trading arrangements with our global partners would ensure the sector can return to growth. And given that growth would be across every region in the UK, there is every reason for the new government to get behind the sector.”

The stakes are considerable. Automotive manufacturing alone turns over more than £85 billion, adds £18 billion in GVA and employs 188,000 people. Take in retail and aftersales and the wider sector is worth nearly £400 billion and supports 830,000 jobs. It also accounts for 10% of all UK goods exports, worth almost £40 billion, with SMMT’s full H1 2026 production data identifying a further £4.6 billion domestic sourcing opportunity by 2030.