UK’s automotive industry could unlock £4.6 billion opportunity

The UK automotive industry could unlock a £4.6 billion boost to domestic manufacturing by the end of the decade, as car makers ramp up requirements for British-built components amid the transition to electric vehicles (EVs), according to new analysis published today by the Society of Motor Manufacturers and Traders (SMMT). It shows demand for UK sourced automotive parts rising by 80% to 2030, creating one of the biggest opportunities in a generation for investors to back and benefit from the domestic automotive supply chain.

Significant opportunities exist to support both next generation electric and other vehicle technologies, underlining Britain’s potential to remain a world class automotive manufacturing base, with the ambition to return to annual output of 1.3 million vehicles by 2035. December 2025 saw the start of next-generation volume battery electric car (BEV) production in Sunderland and, with the planned launch of seven new EV models across the UK this year, BEV volumes are anticipated to more than double by 2028.

As a result, demand for electric motors, power electronics and drive systems (PEMD) is predicted to surge by more than 350% by the end of the decade, while automotive electronics demand is expected to more than double, driven by the increased use of displays (including head-up displays), wiring systems and computing power in modern electrified vehicles. There is also potential for increased battery-related localisation, demand for which is set to more than triple by 2030, with significant spending across battery packs, modules and cells, alongside supporting systems such as casings, battery management software and thermal management.

High-value opportunities
Existing automotive manufacturing remains central to the UK’s value proposition, with interiors, body structures, chassis and exterior components continuing to account for a large share of local supply chain output. High value opportunities remain in seat assemblies, interior and exterior plastics, pressings, castings and braking systems, while demand for internal combustion engine components remains substantial in high-performance engines, transmissions and exhaust systems.

While the UK’s supply chain offers huge potential, the growing connected and automated mobility (CAM) market also presents massive opportunities with a supportive regulatory framework facilitating the shift from testing to deployment. It is set to reach £24 billion by 2040, with driverless taxis already testing in London ahead of planned roll-out later this year.

Mike Hawes, SMMT chief executive, said: “The UK automotive sector is transforming at pace, and for companies looking to invest in Britain the opportunities are clear. We have the skills, the innovation and the industrial base built on the billions already invested into Britian by global brands. With a modern, long-term industrial strategy – with automotive at its heart – the UK is a safe and stable destination for automotive investment amid fierce global competition, increasing protectionism and geopolitical upheaval.”

Business Secretary Peter Kyle, said: “The UK is a top investment destination, and the SMMT’s leadership continues to highlight the scale of opportunity for investors to back our historic automotive industry and help secure the UK’s position as a thriving advanced manufacturing hub. Through our modern Industrial Strategy, we are backing auto firms with the largest Government investment in the automotive industry in the post-war era, helping to create tens of thousands of jobs and attracting billions in private investment through the DRIVE35 programme.”

Myriad opportunities and strengths
The news comes as SMMT launches a new campaign – Opportunity Auto – showcasing the myriad opportunities and strengths of the UK’s advanced manufacturing sector to investors at home and globally. The campaign dovetails with the UK Government’s ambitions – set out in its recent Industrial Strategy, including the Advanced Manufacturing Sector Plan – as it seeks to strengthen domestic manufacturing, improve supply chain resilience and attract overseas capital into strategically important industries, notably automotive.

Opportunity Auto follows a period of significant public and private investment into the UK automotive manufacturing sector. Notably the Government’s Drive35 fund, now worth £4 billion, alongside major EV commitments across the country, including Jaguar Land Rover’s £15 billion five-year strategy, Agratas’ £4 billion gigafactory and £2 billion for Nissan’s UK EV programmes.

This has been matched by billions more investment into the UK’s zero-emission vehicle market, including Government grants for electric cars, vans and trucks together with manufacturer incentives, which has made the UK Europe’s second largest new car and BEV market.

Given conflict in the Middle East and geopolitical tensions, efforts are underway to foster ever more competitive conditions for UK manufacturing, driving down the cost of energy with the British Industrial Competitiveness Scheme, forging closer trading ties with key markets including the USA, South Korea and India, and creating a strong and sustainable domestic market, given manufacturers build close to where they sell.