Chinese competition gathers pace as UK new car sales jump 6.4% in Q1

UK new car registrations rose by 6.4% in Q1 2025, according to the Society of Motor Manufacturers and Traders (SMMT), as the industry continues its recovery, but the uptick comes amid mounting pressure from rapid EV adoption and intensifying global competition, particularly from China.

The UK automotive sector is now valued at over £100 billion, per SMMT figures, but that value is increasingly underpinned by fast-moving developments in electrification, technology, and international market dynamics, according to a newly released report by Nationwide Vehicle Contracts, a UK-based vehicle leasing company and credit broker.

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The “Future of the Auto Industry Report 2025,” outlines the three key disruptors expected to define the market over the next 20 years: Chinese carmakers, the evolution of battery production, and the rise of EVs.

“This growth is encouraging, but it comes at a time of extraordinary change,” said Keith Hawes, Director at Nationwide Vehicle Contracts. “Global pressures, particularly from China, are pushing the industry into uncharted territory.”

Chinese EV brands to challenge traditional manufacturers

With over 200 Chinese automotive brands now in operation, a majority focused on EVs, Hawes says the impact of China’s rapidly expanding automotive footprint will be felt strongly across the UK and Europe.

“We’re already seeing momentum from brands like MG, ORA, BYD, and Omoda, and more are coming,” Hawes said. “Chinese manufacturers are offering advanced EVs at lower prices, which will force legacy brands to rethink their business models or risk being left behind.”

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He warns that traditional manufacturers may soon face difficult decisions, including the need to merge, share technology, or shrink operations to stay viable.

Battery production and servicing models under pressure

Nationwide Vehicle Contracts also highlights battery production as a pivotal area of change. As large-scale gigafactories begin supplying multiple brands, the report predicts a shift toward platform standardisation, enabling cost savings through shared components.

“You’ll see different brands offering unique styling but using the same batteries, motors, and software under the surface,” Hawes explained.

This transformation is already having knock-on effects for the servicing and maintenance ecosystem, with EVs requiring significantly fewer parts and visits to service centres.

“Servicing networks as we know them will shrink, and many businesses focused on internal combustion vehicles will need to adapt quickly,” Hawes said. “Remote diagnostics and over-the-air software updates will allow manufacturers to manage a vehicle’s lifecycle more efficiently than ever before.”

UK must prepare for new entrants and economic shifts

While the influx of Chinese EVs could improve affordability for UK consumers, Hawes stressed the need for strategic government investment to protect the domestic industry and support its transition.

“These new, lower-cost brands could help meet the UK’s 80% EV target by 2030, but domestic infrastructure and investment must keep pace,” he added.

Countries like Vietnam, Indonesia, Mexico, and South Korea are also expected to play a growing role in global car production, presenting both opportunities and fresh competition.

As the UK prepares for a 2035 ban on new petrol and diesel cars, Nationwide Vehicle Contracts concludes that while current market growth is a positive sign, the auto sector must innovate rapidly to maintain momentum.