The current UK government is proving one of most automotive-friendly in years, winning plaudits from the industry for its successful haggling over US tariffs, loosening of the ZEV mandate without a disruptive rewrite, and now for a new industrial strategy that puts automotive right at its heart.

One of the hopes the government expressed within the strategy document is that UK vehicle manufacturing output can climb again, from a paltry 905,233 cars, vans, trucks and buses last year to 1.3 million by 2035. 

Given UK production peaked at 1.81 million vehicles as recently as 2016, that doesn’t seem too hard to achieve. 

However, the world is a very different place now. We’ve lost two key manufacturing plants in Swindon and Luton and the UK has some unique challenges to overcome. The industrial strategy sets out to do exactly that, but how successful will it be?

For a start, the 1.3 million production target is above even the most bullish hope of research company AutoAnalysis, which supplies automotive body the SMMT with its forecasts. It sets out a 1.1 million figure by 2029 in its most ‘optimistic’ scenario. 

“There’s a lot of spinning plates,” Ian Henry, head of AutoAnalysis, told Autocar. “Based on notional capacity, the UK could still theoretically produce 1.3 million vehicles with everybody running at full tilt, but that’s unlikely to happen. You’re going to need a new investor, and that probably means a Chinese car company.”

So the task is to make the UK attractive enough to firstly persuade the likes of Toyota, BMW, Nissan, JLR and Stellantis not to follow Honda out of the door, and secondly to attract another big player.

That is tricky, to say the least. The chief competition comes from low-cost countries such as Hungary – the European leader in attracting Chinese investment from the likes of battery maker CATL and BYD.

So cost is the number one priority, and first on the list is tackling our sky-high industrial energy prices. Which, as the government pointed out in its strategy document, are twice the European average. “This issue is one of the most pronounced challenges to the competitiveness of our energy-intensive sectors and the attractiveness of the UK to foreign investment,” the document stated.

That’s mainly because UK prices are pegged to gas, which shot up after Russia’s invasion of Ukraine, undoing the hard work of cheaper renewables.

To tackle that, the strategy includes something called the British Industrial Competitiveness Scheme, which, the government said, would reduce electricity costs by around £35-£40 per MWh up to 2030 for up to 7000 businesses in the eight sectors, including automotive, that it judges to be most in need of support. 

Those businesses will be exempt from paying specific energy cost add-ons that support the renewables obligation, feed-in tariffs and the capacity market (the last of which is to support keeping plants on standby). The SMMT has calculated that average UK energy taxes are more than six times higher than those in the EU at 6.2p per kWh versus 1p per kWh.

This so-called Industry Supercharger will bring costs “more in line” with other major economies – for example, Germany – the government said.

“That’s welcome,” Steve Turner, assistant general secretary at trade union Unite, told the audience at the recent SMMT Summit: “You've got to do something about the price of energy if we're going to be a superpower for battery manufacturing,” he said, citing a particularly energy-hungry business.

Also on the energy front, the government has promised to speed up grid connections and planning for on-site renewable generation. “Don't underestimate the importance of that,” said SMMT chief Mike Hawes at the Summit. “I think every major manufacturer I speak to wants to invest in renewable energy on site. They talk to the National Grid, who says, ‘yeah, of course, you can have that in 2033, 2034’, which is out of scope.”

The government has also promised to make £2.5 billion available to fuel research and R&D to spend between now and 2030 to shore up UK’s rickety supply chain. Of that money £2bn was announced by the Conservative government in November 2024.

This, the government hopes, will help double investment between now and 2035. After an impressive £20bn of investment in British automotive and battery manufacturing industries was promised in 2023, that number shrank to £3.6bn in 2024 and £2.7bn in the first part of 2025, according to SMMT figures.

The 10-year plan has been applauded by industry leaders, who were forced to watch helplessly as the previous industrial strategy set out in 2017 under then prime minister Theresa May was essentially abandoned in 2021 by the Boris Johnson government. 

“We welcome this strategy. I think the duration of it is important,” Phil Jones, managing director of Leyland Trucks told the Summit audience. “That does help our investment case when we're pitching within our company for investment in the UK rather than in other plants in Europe or the US.”

Automotive leaders including Ford UK head Lisa Brankin also welcomed the support for training, another key concern of automotive as they pivot to an electric and digital future.

The UK now finds itself in a fairly good place as an export hub. The uncertainty of Brexit was mostly resolved by a tariff agreement with the EU that leaves a rump of customs faff that’s expensive and time-consuming – but not debilitating to incomers. 

A trade agreement with India, meanwhile, promises to cut tariffs on high-end cars from 100% to 10%, subject to a quota that has yet to be decided. “It would put all the luxury British brands in a position where we’re almost in the normal price category of the highest-spec premium cars,” Aston Martin head Adrian Hallmark told the Summit.

Meanwhile, the 10% tariff that the government negotiated for cars exported to the US might be four times higher than the 2.5% rate that existed before April, but it is considerably better than the 27.5% that non-UK exporters are charged. “We're less worse off than our European and non-European competitors, so we have a small relative advantage there,” said Hallmark.

The 100,000 quota and rules of origin issue (yet to be agreed) means that China is unlikely to use the UK as a friendly springboard into the US, so if they come to the UK, it would be to sell into the EU. 

Fast-growing car company Chery is one brand that sounds agreeable to a move. “If we, as a brand, want to be here, to be committed, to be here, [manufacturing] is something that we should do,” UK head of Chery’s Omoda and Jaecoo brands, Victor Zhang said at the Summit. “This is the open topic. Everything is on the table. We are considering. We are talking with the relevant parties.”

One way to land a Chinese brand is to prepare a suitable site in advance, complete with grid connection, transport links, and planning permission. Car makers in China are used to local officials moving mountains (almost literally) to accommodate their expansion plans and would expect similar treatment. “Regulations are a number one concern for the Chinese,” according to one official tasked with building business links between China and the UK.

Counting against the UK landing a growth manufacturer like Chery is that the Chinese are battling over-capacity in their home market, and so far Chery’s limited moves into European assembly have been in lower-value semi-knocked down manufacturing – in other words, essentially finishing off cars pre-built in China.

For more than 10 years, British automotive has been in a kind of managed decline, where wins have been measured in automotive plants staying open and landing new models. If the government strategy could raise that bar to include luring in new manufacturers, that would be a considerable victory.