From EV growth to supply chain struggles: What’s ahead for automotive in 2025?

We recently launched the latest edition of our Insight Quarterly report, revealing current automotive market data, from the latest used and new car sales to the state of the EV revolution. Utilising these insights and the thoughts of our industry partners, this article focuses on the top automotive trends businesses should be aware of in 2025.

The automotive sector is gearing up for a transformative 2025, driven by changes in consumer behaviour, regulatory pressures and technological advancements. Using the latest automotive market data and insights from industry experts, we’ve broken down what this means for fleets, OEMs and dealers.

Electric vehicles surge into the mainstream despite challenges 

The shift to EVs will accelerate in 2025, driven by governmental mandates, incentives, and consumer demand for sustainable options. Two in every five (21%) new cars registered in 2024 were EVs, a trend expected to grow by a further 5% in 2025.

Despite this growing interest from consumers, challenges persist for the industry. OEMs, which are rapidly reducing production of ICE vehicles by government mandates, will face intensifying pressure to scale their EV production while maintaining profitability. Working with fleet owners could help steady revenue streams, as these businesses are quickly expanding their EV fleets due to government and environmental pressures and the savings they’ll make in fuel and maintenance.

Dealerships, on the other hand, face the challenge of adapting to a new sales mix. It’s no secret that EVs require a different sales and servicing approach, which is expected to impact profit margins. This is due to electric vehicles requiring less frequent servicing and maintenance, as well as the required specialised knowledge needed to work on EVs. The issue of residual values and customer confidence in the lifespan of electric vehicles will also strain dealers. In essence, it’s more important than ever to explore new technologies, train staff and educate consumers.

They’re not alone in facing that challenge, though. Cox Automotive’s latest venture, EV Battery Solutions, aims to alleviate consumer concerns and equip businesses with the technology they need to meet the demand for electrification.

New car registrations continue to climb, with EVs leading the charge. 

Although new car registrations were 11.6% below the 2001-2019 average in 2024, there has been slight growth compared to previous years, which is expected to continue between 2025 and 2027.

However, decisions on a global scale continue to shape the composition, competitiveness, and future of the new car market. In particular, the interest in EVs and other new energy vehicles (NEV) is set to have a huge impact. By 2027, petrol/MHEV registrations are predicted to decrease from 51% to 35%, while diesel/MHEV vehicle registrations are set to decline by nearly 57%. In contrast, EV registrations are projected to rise by 165.4%, while PHEVs and HEVs will grow from 22% to 28%.

For OEMs, this highlights the need to produce more EVs despite their profitability in the UK being challenged by Chinese manufacturers. While they previously dominated the UK EV market, OEMs are facing competition from Chinese manufacturers like BYD, GWM, Omoda, Jaecoo, and Polestar, which have brought lower-priced new energy vehicles to market. These new players are appealing to consumers who are seeking a more sustainable option at a more affordable price, which is expected to increase further as economic pressures continue into the new year.

To grow volume in this evolving market, OEMs must invest in new technology while preserving profit margins despite rising competition. This is no mean feat, especially considering tightening emission regulations and consumer expectations. The challenge could be for OEMs to reconsider their regional focus and market mix to enhance profitability, potentially resulting in fewer choices in the UK market.

For dealers, EVs' leading role in new car registrations means the pressure to train staff and invest in new technologies will only intensify in 2025 and beyond.

While challenging in the short term, the investment will certainly be worth it in the long run, and working with more affordable Chinese manufacturers could give dealers a strategic advantage.

When it comes to fleet owners, who are increasingly expected to lead by example in sustainable transportation, this shift in the new car market means the challenge of managing the residual values of EVs will remain prominent.

The used car market will continue to see supply challenges

In 2025, the used car market faces a dual reality. On the one hand, demand for used vehicles will remain robust due to the gap in affordable new cars. On the other hand, supply challenges will persist, thanks to pandemic disruptions. This means a shortage of young ICE vehicles will likely elevate values and create fierce competition amongst dealers.

Thanks to de-fleeting cycles and salary sacrifice programs, there will likely be a steady influx of nearly new electric vehicles into the used car market. In theory, this is great; as we know, interest in new energy vehicles is growing, but it comes with challenges. Dealers must tackle the issue of the residual value of used EVs impacting their profit margins, manage consumer hesitations around second-hand battery quality and charging costs, and manage energy prices, which continue to rise.

Online retail expectations are more important than ever. 

Data shows that most UK retail sales are online, a trend expected to continue in 2025. However, standards are soaring, thanks to the FCA’s 2023 Consumer Duty Principles, which call for fairer digital consumer experiences. For the automotive industry, this creates a growing demand for offering a better digital journey for consumers during the exploration stage and when buying and financing vehicles.

Retail solutions like Codeweavers, which offer accessible and comparable information for consumers, are key to building trust and driving sales. This is also true of financial services, which recently saw a Court of Appeal judgement demanding transparency in financing options as recently as October 2024. While these new standards and judgements can seem challenging and somewhat expensive to keep up with, it’s essential for OEMs and dealers to carefully consider their online retail capabilities sooner rather than later.

As we head into the new year, the market growth seen in 2024 certainly offers glimmers of hope, especially in the used car market. However, UK automotive has still not recovered from the impact of pandemic-related supply chain constraints.

This, combined with the continued effects of tough economic conditions on buying behaviour and business costs, highlights that while growth is to be celebrated, more challenges lie ahead. To thrive in this transformation era, businesses should stay current with the momentum driving these changes, embrace innovation, and remain as agile as possible.