Carmakers are holding back final investment decisions for their UK factories until the government relaxes rules requiring an increasing share of new car sales to be electric, according to Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT). Manufacturers with existing UK operations are weighing whether to build new models domestically but are awaiting an easing of the zero emission vehicle mandate before committing, a delay that matters because it threatens further stagnation in an industry already grappling with competition from China, US tariffs and the cost of switching to electric technology.

Business secretary Jonathan Reynolds has signalled the mandate, which runs to 2030, is likely to be watered down, though the electric charging industry and environmental campaigners oppose any weakening given the potential extra carbon emissions. UK vehicle production fell 7.5% in the first half of 2026 to 386,000 cars and commercial vehicles, SMMT figures published on Thursday show. Firms reportedly waiting on the decision may include Toyota, which builds the Corolla in Derbyshire, and Mini, which has postponed electric model plans at its Oxford plant, while Nissan is in talks over building a car for China's Chery at Sunderland and Jaguar Land Rover is preparing new models. Britain's future trading relationship with the EU, including battery sourcing rules and potential EU subsidy restrictions, also looms over investment decisions.