IQ

Insight

Quarterly

Q1/2025

A new reality for the fuel type composition

The make-up of the UK’s vehicle base has undergone one of its most significant shifts in recent history. Over the past four years, diesel’s market share has continued to decline representing just over 6% in 2024 - a decrease of more than 2 million units, or a 76.21% drop. While still retaining the lion’s share, petrol has also seen a reduction, with a loss of 1.4 million units, representing a 26.61% decline over the same period.  

These changes highlight growing volumes of electric vehicles (EVs) entering driveways today, a promising development in the face of an evolving Zero Emission Vehicle (ZEV) mandate. Compared to the previous four-year period, the rise of full-battery EVs has been remarkable, with a staggering increase of nearly 560%. Since 2020, approximately 979,000 EVs have entered the market, capturing just shy of 20% of the total market in 2024.  

We also observed growth across hybrid vehicles – both plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs) – with 151% increase over the last four years. This translates to over 800,000 total vehicles and a 22% market share.  

Our first look at 2028: Past the inflection point

Tracking the shifts over the past four years, we get our first look at what the market could look like in 2028. Petrol is expected to represent just 35% of new registrations by this point as EVs achieve parity with petrol sales, with a predicted share of 36%. While diesel falls to 3% of the market.

EV registrations as a percentage of new cars in the UK

Source: Cox Automotive

Staying the course in choppy waters

So how does the industry hope to reach this crucial point? A series of hurdles stand in its way. The next four years will remain volatile as the sector adapts to economic headwinds and ever-evolving consumer demands. We will continue to bear witness to the rise of new manufacturers, including those from China and other international markets, while incumbent manufacturers adjust their in-market strategies. All while the industry responds and adapts to increasingly diverse local and internal regulations.  

Fleet operators will continue to play a crucial role in driving electrification forward while the private buyer industry navigates evolving complexities. However, the question remains, at what cost can this momentum be sustained without broader consumer adoption? 

Manufacturers are investing a significant amount in research and development into electric and autonomous vehicle technologies. This leading to more efficient and advanced vehicles hitting the roads, attracting more of the tech-savvy, younger demographic.  

European new car registrations by fuel type (YoY %+/- 23-24)

Source: acea January 2025

Production recovery continues to outpace registrations

Zooming into 2025, the near term will follow a similar trajectory to 2024, characterised by uncertain economic growth the risk of slower-than-expected deflation. Global production of cars and light commercial vehicles has steadily increased and is expected to stabilise through 2025-28. Registrations fell short of the two million mark, however, resulting in a significant deficit of 1.7 million fewer vehicles on UK roads between 2020-24. This challenge was further compounded by the slow recovery of private buyers, whose registrations have declined by 19.2% in the same timeframe.  

The new market will also be altered by a host of new brands now available to UK drivers. Following a raft of new brand launches in 2024, including Jaecoo, Omoda and Skywell, the UK is now home to over 60 manufacturers. These challenger brands are coming in strong, which is pushing traditional manufacturers to work harder to retain their customer bases and keep pace with evolving technology coming from these new brands.  

The picture in Europe is mixed. In Germany, projected sales of around 3.66 million vehicles represents an annual decline, meanwhile the new car markets in Spain, Italy and France are all indicating growth in the next year. New available models are increasing consumer interest in EVs, helping to bolster this growth.  

Future investment is cause for optimism

Despite pressure in the market, the UK remains a significant international investment hub, with opportunities for growth abound. Nissan and JATO’s recent announcement of its new powertrain manufacturing site in Sunderland is clear evidence of this. Strategic adaptation, innovation and a strong focus on building resilient partnerships will be crucial for navigating the challenges to come. If the industry can prioritise these measures, we retain cautious optimism that the automotive industry can set a foundation for sustainable recovery in the long term.

What 2025 has in store for the industry

Breaking the two million mark in new car registrations in 2025 will be a pivotal milestone for the UK’s automotive recovery. Achieving this target will be heavily dependent on the ability of new market entrants to establish their brands and build trust with UK drivers. The confidence of the fleet and leasing sectors will also play a critical role in sustaining growth and driving the transition toward alternative fuel vehicles.

New car registrations - 2017-20 vs. 2021-24

Source: Cox Automotive

New car registration forecast 2025 - 2028

Source: Cox Automotive

UK new car forecasts