UK registrations decline ahead of Expensive Car Supplement threat

05 February 2025

The UK’s new-car market got off to a shaky start in 2025, with challenges ahead for battery-electric vehicles (BEVs). Phil Curry, Autovista24 special content editor, analyses the latest registration figures.

The UK’s new-car market started 2025 in a registrations decline. This continued a run of delivery drops stretching back to October 2024.

In January, new-car deliveries declined 2.5%, with 139,345 units taking to the road, according to data from the SMMT. This was 3,531 units fewer than the same period in 2024.

The UK was one of the most stable markets in Europe during the first seven months of 2024. However, the country experienced a tumultuous time since August last year. Following the first registration decline in two years, only September saw an improvement. This was due to a surge in deliveries, thanks to the country’s ‘new plate’ rotation.

The country has struggled with consumer confidence in recent months. Meanwhile, its zero-emission vehicle (ZEV) mandate has caused problems for carmakers. The SMMT also cited tough economic conditions as another factor in January’s decline.

UK BEV building

BEV registrations started 2025 well, with a 41.6% increase to 29,634 units. This equated to an 8,699-unit improvement year on year.

January’s result was more than double the entire BEV registration figure for 2017, highlighting how far the technology has come. Yet, despite being the second-most-popular powertrain in the market, it was still some way behind petrol.

BEVs secured a share of 21.3% in January. This was up by 6.6pp year on year but below the 22% ZEV mandate threshold for 2024. With this target increasing to 28% of ZEV sales in a carmaker’s fleet for 2025, there are challenges ahead for the technology.

BEV registrations will not be helped by the introduction of vehicle excise duty (VED), scheduled to come into effect from April. At this point, every new all-electric model registered will be required to pay the tax.

In the first year of registration, this will cost drivers £10 (€12). After this, they will pay the standard annual rate of £195. Drivers of BEVs sold since April 2017 will also be required to pay the higher annual rate.

Expensive Car Supplement threat

Yet for BEVs that cost more than £40,000, drivers will have to pay the Expensive Car Supplement (ECS). This will be added to the VED rate for five years from the second year of registration. This could mean drivers would pay an additional £410 on top of the VED duty for five years.

‘Affordability remains a major barrier to uptake, hence the need for compelling measures to boost demand, and not just from manufacturers. The application, therefore, of the Expensive Car Supplement to VED on electric vehicles is the wrong measure at the wrong time,’ commented SMMT chief executive Mike Hawes.

‘Rather than penalising EV buyers, we should be taking every step to encourage more drivers to make the switch, helping meet government, industry and societal climate change goals,’ he added.

The ECS threshold has not been amended since the additional tax was introduced eight years ago. Since then, the BEV market has grown as sustainability priorities have developed. With numerous models exceeding the £40,000 limit, the introduction of VED with the ECS could impact the desirability of BEVs.

The SMMT is calling on the UK Government to raise the eligibility threshold for all-electric models. Either that or exempt them entirely from the Expensive Car Supplement. The body argues that this would send the message that EVs are essentials, not luxuries. This would ensure vehicle taxation remains fair and appropriate for today’s market conditions.

Help from hybrids

Registrations of full hybrids (HEVs) improved by 2.9% in January, as 18,413 units took to UK roads. This was an increase of 517 deliveries compared to the same period last year.

This growth meant that HEVs took a 13.2% share of the market, up by 0.7pp compared to January 2024. The powertrain was the UK’s third-most-popular technology in the month.

Plug-in hybrids (PHEVs) saw growth of 5.5% at the start of the year. The technology reached 12,598 deliveries, up by 654 units. This gave the powertrain a 9% market share, up 0.6pp year on year.

Combining the PHEV and BEV results means electric vehicle registrations grew 28.4% in January, with 42,232 units. This gave plug-ins a 30.3% share, ahead of its 23% hold from 12 months ago.

The market for electrified vehicles, including HEVs, BEVs and PHEVs, improved 19.4%. However, the additional 9,870 units were not enough to offset the ICE deficit.

Petrol falls from grace

The trend of petrol registration declines continued in January. The fuel type was down by 15.3%, with 70,075 units. This figure includes mild-hybrid models, but this was not enough to prevent a 12,678 unit loss.

January’s result followed further drops in November and December, slumping by 17.7% and 20.9%, respectively. In fact, the powertrain has been in decline since March 2024.

This reflects the changing attitudes towards the internal-combustion engine (ICE). It also shows manufacturer preferences towards electrified models, especially with tougher ZEV mandate targets for 2025.

This year, 28% of a carmaker’s fleet must be made up of BEVs or hydrogen fuel-cell models. Therefore, there may be a shift in the availability of ICE units. However, brands did not seem to hold back petrol registrations at the end of 2024 to boost their ZEV registrations. Instead, changing attitudes towards the fuel type seem apparent.

Despite the decline, petrol still led the market. The powertrain secured 50.3% of registrations, a drop of 7.6 percentage points (pp) against last year.

The diesel market also continued to shrink, with just 8,625 registrations, a fall of 7.7%. This meant 723 fewer units left dealerships in January, with the 6.2% market share dropping by 0.3pp.

A total of 13,401 ICE-powered models were registered in January, down by 14.6%. The grouping made up 56.5% of the market last month, far behind its 64.5% share from one year ago.

Decline expected in 2025

With a difficult start to the year, the UK market must hope to build back up in 2025, especially in the second half.

However, the latest outlook from the SMMT suggests that registrations will decline slightly, by 0.2%, across the full year. With this forecast, around 1.95 million units will be delivered to customers.

BEV uptake is expected to improve by 20.9% to 462,000 units, a 23.7% market share. This will be far short of the mandated 28% target for 2025. The gap is anticipated to widen in 2026 when BEVs are expected to comprise 28.3% against a target of 33%.

The SMMT believes that market incentives are required to boost the uptake of BEVs. There is potential for the government to subsidise purchases by guaranteeing consumer loans, according to the Financial Times. This plan would see the state underwriting private-sector loans to reduce monthly repayments, bringing purchase costs down.