UK new car sales climb for second month in 2025, led by discounted EVs

UK new car registrations increased 1.6% year-over-year in May to 150,070 units, marking the strongest May performance since 2021, according to the Society of Motor Manufacturers and Traders (SMMT). Electric vehicles drove this growth, representing over 47% of total car sales with battery electric vehicle sales specifically rising 25.8% year-over-year. The surge in EV sales is attributed to aggressive discounting by manufacturers, particularly Chinese EV makers expanding in the European market, which is impacting profit margins across the industry.

Analysis

New car registrations in the United Kingdom increased for the second consecutive month, rising 1.6% year-over-year in May to 150,070 units, marking the strongest performance for that month since 2021. This growth was significantly propelled by the electric vehicle (EV) segment, where sales accounted for over 47% of the total, and battery electric vehicle (BEV) sales specifically surged 25.8% year-over-year. The primary catalyst for this EV sales uptick appears to be aggressive discounting strategies, notably from Chinese EV manufacturers actively expanding their footprint in European markets. While these discounts are fueling apparent demand for EVs, the resulting intense price war is reportedly exerting considerable pressure on the profit margins of several car manufacturers across the industry, indicating a challenging operating environment despite volume increases.

Key Decisions for Investors

• Investors should acknowledge the volume growth in the UK car market, particularly in EVs, but exercise caution regarding automakers' profitability due to the ongoing price war driven by aggressive discounting.
• Monitoring the sustainability of EV demand if discounts are reduced, and closely tracking the margin evolution of manufacturers with significant European EV exposure, is crucial.
• Consider the intensifying competitive landscape, as the expansion of Chinese EV makers could continue to pressure established players, potentially impacting market share and profitability forecasts for incumbent European and UK-focused automakers.