US tariffs cripple UK car production, lowest since 1949
British car production suffered a big dent last month as US tariffs on foreign-built vehicles came into force, with May being the worst month on record (excluding Covid lockdowns) since 1949. New figures from the Society of Motor Manufacturers and Traders (SMMT) published today show that new car and commercial vehicle volumes fell by 32.8 per cent in May, marking the fifth consecutive month of declining outputs.
Just 49,810 units made it off the assembly line - officially the lowest May performance in a pandemic-free term for 76 years. Trump announced tariffs on car imports into the US of 25 per cent during his trade-wobbling Liberation Day statement in April. In an immediate response, a number of UK car manufactures - including JLR, Lotus and Aston Martin - paused shipments across the pond.
However, since the negotiated trade deal with Britain including a lower 10 per cent tariff for inbound vehicles, all have re-started deliveries via the Atlantic - though the new level will not come into effect until Monday. Unsurprisingly, car exports – the majority of the UK market – took a big hit with production of vehicles bound for overseas down 27.8 per cent to 37,448 units. The US export market alone fell by 55.4 per cent in May compared to 2024, with the share of motors made for foreign markets declining from 18.2 per cent to just 11.3 per cent.
The SMMT reports that the US tariff introduction 'depressed demand instantly' but is hopeful that the new trade agreement will mean this drop is 'short-lived'. As the US trade deal with the UK only allows for 100,000 units however, anything over that will be hit with the original 25 per cent levy. On top of the fall in exports to the US, shipments to the EU were down 22.5 per cent. When combined, the hammering exports took contributed to an overall fall in yearly output to date of 13.9 per cent - down 12.9 per cent on 2024 to 384,226 units.
However, a 42.1 per cent fall in output for the smaller domestic market meant exports comprised a larger share of production, up to 78.5 per cent. Commercial vehicle output was also down sharply, by 53.6 per cent to 2,087 units, and exports fell from 67.9 per cent to 41.4 per cent, with the domestic market now the primary destination for UK commercial vehicle output. In better news, three major new trade deals are secured with the US, EU and India, the sector has pledged to build on the government's landmark Industrial and Trade Strategies published this week.
The SMMT says that rapid action on energy costs and an increased ability to access key overseas markets – plus additional measures to energise domestic demand – could put the UK on course to reclaim its place in the top 15 automotive manufacturing nations, for the first time since 2018. Mike Hawes, SMMT chief executive, commented: 'While 2025 has proved to be an incredibly challenging year for UK automotive production, there is the beginning of some optimism for the future.
'Confirmed trade deals with crucial markets, especially the US and a more positive relationship with the EU, as well as government strategies on industry and trade that recognise the critical role the sector plays in driving economic growth, should help recovery. With rapid implementation, particularly on the energy costs constraining our competitiveness, the UK can deliver the jobs, growth and decarbonisation that is desperately needed.'
New 10 per cent tariff rate will be in place on Monday
Britain's car industry was given a boost this week after it was confirmed that the newly-agreed reduced US tariff rate will be imposed from Monday. Donald Trump has signed an executive order, taking effect on June 30, which means the sector will escape the levies being imposed on car makers in other countries. Jaguar Land Rover and Aston Martin will face charges of 10 per cent rather than 27.5 per cent – though that is still higher than the pre-Trump level of 2.5 per cent. Mike Hawes added: 'It's not as good as the 2.5 per cent we had – but it's a damn site better than 27.5 per cent.'
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