Navigating complex terrain

The UK automotive market is undergoing a period of profound transformation. From the fragility of new car sales to the resilience of the used market and the disruptive rise of Chinese EV brands, the industry is being reshaped by a complex mix of economic pressures, regulatory mandates, and evolving consumer behaviours. For car dealers, understanding these dynamics is not just important; it’s essential for survival and success. Here are our key learnings from the latest market trends and what they mean for your dealership.

The new car market: A fragile balancing act

The first half of 2025 has revealed fragility in the new car market. While manufacturer-led incentives initially masked deeper issues, the second quarter exposed inconsistency in retail demand. A record 30% of June’s new car registrations occurred on the final day of the month, clear evidence of last-minute, tactical activity driven by pressure to hit sales targets.

This surge in short-cycle registrations highlights a growing reliance on volume pushing, which is unsustainable in a margin-sensitive environment. The early-year optimism, buoyed by incentives and a pull-forward effect from Vehicle Excise Duty (VED) changes, quickly faded when those incentives were withdrawn. The result? A sharp drop in showroom activity and a stark reminder of the market’s vulnerability.

Our advice? Be cautious of over-reliance on manufacturer incentives. Focus on building sustainable retail demand through customer engagement, value-added services, and flexible financing solutions.

Chinese brands are here to stay 

China’s dominance in EV production is reshaping the global automotive landscape. With 27% of all new vehicles sold in China now electric, and exports growing rapidly, Chinese brands are well-positioned to capitalise on Europe’s electrification goals.

Brands like BYD, MG, and Nio are offering high-spec, affordable EVs that meet UK consumer expectations. Their localisation strategies, building dealer networks, setting up European R&D centres, and even local manufacturing, signal long-term commitment.

As a result, these are no longer fringe players; they’re rapidly becoming mainstream contenders. In H1 2025, new entrants accounted for 3.5% of total UK new car registrations, with BYD leading the charge at 1.86% market share. Brands like Jaecoo, Omoda, and Xpeng are also gaining traction, supported by aggressive pricing, high-spec models, and expanding product lines.

With more launches expected from Chery, Changan, and Geely, the next 6–12 months will see even greater competition. These brands are not just competing on price; they’re reshaping consumer expectations around value, technology, and design.

Regulatory pressure is only set to increase

The Zero Emission Vehicle (ZEV) and Vehicle Emissions Trading Scheme (VETs) mandates are forcing manufacturers to juggle compliance with commercial targets. This is likely to result in more forced registrations and increased discounting in the latter half of 2025, further squeezing dealer margins. Retailers must also contend with a historically weak consumer market, where affordability remains a major barrier. To weather the regulatory storm, dealers need to stay agile. Monitor regulatory developments closely and work with manufacturers to manage stock levels and incentives. Focus on operational efficiency and margin protection through smarter inventory management and digital tools.

The used car market: Still a stabilising force

In contrast to the volatility of the new car sector, the used market has remained relatively stable. A persistent shortage of 3–5-year-old vehicles, stemming from pandemic-era registration losses, has kept wholesale values buoyant and competition high.

Retail performance has been more mixed, with car supermarkets outperforming franchise and independent dealers. Despite economic uncertainty, demand for affordable, high-quality used vehicles remains strong, particularly as new car prices continue to rise.

The used market remains a vital revenue stream. Retailers who prioritise well-presented, retail-ready stock and maintain a disciplined approach to acquisition and pricing will be best positioned to capitalise on the used market opportunities. 

EV values remain under pressure

The gap between internal combustion engine (ICE) and electric vehicle (EV) residual values continues to widen. While ICE vehicles under 12 months old have seen only a 1% drop in value, EVs in the same age bracket have declined by 4%, and those aged 1–2 years have plummeted by 13%.

This is largely due to aggressive discounting in the new EV market, which is undermining used values. As more nearly-new EVs enter the market, particularly from Chinese brands, pricing pressure is expected to intensify.

Turning challenge into opportunity

The automotive industry is at a crossroads. While challenges abound, from regulatory pressures to shifting consumer behaviours and intensifying competition, there are also significant opportunities for those willing to adapt.

For car dealers, the path forward lies in agility, innovation, and customer-centricity. By refining business models, embracing digital tools, and staying ahead of market trends, retailers can not only weather the storm but emerge stronger on the other side.

by Philip Nothard,
Insight Director at Cox Automotive