UK Automotive Industry Faces Critical Need for Major New Factory to Achieve Labour's Production Ambitions
The United Kingdom's automotive sector is confronting what industry leaders describe as its most challenging period in decades, with a stark warning emerging about the necessity for substantial new manufacturing capacity. According to Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), achieving the Labour party's target of producing 1.3 million cars annually by 2035 will likely require the construction of a significant new factory within the coming years.
Production Figures Reveal Steep Decline Amid Ambitious Goals
Newly released data from the SMMT paints a concerning picture of the current state of UK vehicle manufacturing. Production slumped by 15.5% in 2025 compared with the previous year, reaching its lowest level since 1952 when excluding the extraordinary circumstances of Covid-19 lockdown periods. Only 764,715 cars and vans were manufactured during the year, making Labour's aim to nearly double output to 1.3 million vehicles appear particularly ambitious against this backdrop of decline.
Hawes emphasised the scale of the challenge, stating that reaching the target would necessitate a three-pronged approach: "keeping what you've got, growing what you've got, and then also trying to attract some additional inward investment." He added with particular emphasis: "To get to 1.3 million you kind of need a new plant."
Chinese Investment Emerges as Potential Catalyst for Growth
Industry observers increasingly view Chinese manufacturers as the most probable candidates to establish new electric vehicle assembly facilities in Britain. This perspective gains momentum as Keir Starmer, the Labour leader, undertakes a three-day visit to China accompanied by a business delegation featuring executives from prominent automotive firms including Jaguar Land Rover and McLaren, alongside representatives from Octopus Energy, a major electric vehicle fleet operator.
Hawes pointed to this diplomatic mission as a potential catalyst for new investment, noting: "In terms of who is expanding their production globally, it's the Chinese. There is dialogue taking place." The statistics support this focus on Chinese manufacturers, with their vehicles accounting for 9.7% of UK new car sales in 2025 – nearly doubling their market share within just twelve months. Leading brands such as MG, BYD, and Chery (which also operates Jaecoo and Omoda) have made significant inroads into the British market, benefiting from the UK's decision not to impose tariffs on Chinese imports unlike the United States or European Union.
Industry Endures 'Toughest Year in a Generation'
The SMMT chief executive characterised 2025 as "the toughest year in a generation" for the automotive sector, referencing multiple challenges that have buffeted the industry. These include disruptive US trade tariffs, ongoing turmoil at Nissan, and a significant cyber-attack that severely hampered production at Jaguar Land Rover during August and September.
Despite these substantial difficulties, Hawes identified reasons for cautious optimism looking forward to 2026. A record 41.7% of new cars produced last year – equivalent to 298,813 vehicles – were battery electric or hybrid models, representing an increase of 8.3 percentage points compared with 2024 figures. This shift toward electrification could provide a foundation for recovery if supported by appropriate investment and policy frameworks.
Strategic Advantages and Manufacturing Logic
When questioned about why Chinese companies would choose to invest in British manufacturing facilities when they maintain well-established production bases domestically, Hawes highlighted strategic advantages. "In this volatile world, producing close to where you sell gives more assurance and certainty to your business," he explained, emphasising the logistical and commercial benefits of localised production.
He further elaborated on the UK's competitive positioning: "The fact that the UK has always stood for free and fair trade and open trade, and it's been welcoming for investors for many decades, puts us in a position where we can say that we are very open." This openness, combined with the growing market presence of Chinese automotive brands in Britain, creates what industry analysts see as a compelling case for local manufacturing investment.
Hawes concluded with a clear assessment of the investment landscape: "If you are going to grow the industry, we need investment in new models here – and when you talk about new entrants there is really only one game in town," directly referencing the pivotal role Chinese carmakers are expected to play in any future expansion of UK automotive manufacturing capacity.
The possibility of Chinese investment gained further credibility last summer when Chery confirmed it was "actively considering" establishing a production plant in Britain as part of a broader localisation strategy. As political and business dialogues continue between UK and Chinese representatives, the automotive industry watches closely for signs that could transform ambitious production targets into tangible manufacturing reality.
