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The new car market has entered 2025 with renewed momentum and cautious optimism particularly for electric vehicles and emerging brands despite geopolitical and economic headwinds, according to Cox Automotive’s latest car sales forecasts.

Philip Nothard, insight director at Cox Automotive, believes the industry is adjusting to a “new global production reality” shaped by China’s rapid rise and changing consumer demands.

“Over the last 18 months, we’ve seen a fundamental shift in where and how cars are being built,” said Nothard. “China’s production surge has been nothing short of transformative.”

New data from Cox Automotive shows China’s passenger car output grew by 29% between 2019 and 2024, giving it a commanding 40.6% share of global production. Meanwhile, the EU27 and UK saw their combined output fall by 21%, shedding 5.1% of their share.

“China’s ability to supply its domestic market is staggering,” Nothard added. “Only 3% of its vehicle sales come from imports, compared to nearly 48% in the U.S. That kind of resilience has huge implications for the rest of the world.”

Reflecting wider market caution, the global production forecast for 2024 has been revised down 3% to just over 89 million vehicles. For the UK, that equates to 2.34% of the global total.

UK market shows resilience

Meanwhile, the UK new car market is off to a strong start in 2025, with more than 580,000 registrations in March – the best monthly figure since 2019.

“This is a positive signal,” said Nothard. “The market is recovering — not just in fleet, which continues to dominate, but also among private buyers. That confidence is gradually returning.”

Cox Automotive forecasts 2,084,477 new car registrations in the UK for 2025, a 29.1% increase from the post-pandemic low in 2022, though still 9.8% down on 2019 levels.

“This rebound hinges on the continued success of new entrants and their ability to build strong relationships with UK dealers,” Nothard noted. “If they keep their current trajectory, passing the two million mark this year is very achievable.”

New brand disruption 

Chinese brands continue to make significant inroads into the UK market. BYD, for example, secured a 1.6% market share in Q1 2025 – a 625% year-on-year increase – outperforming several legacy brands.

“We’re seeing disruption on a scale that’s forcing everyone to rethink their strategies,” said Nothard. “BYD’s rise is a wake-up call. With their premium brand Denza on the way, and other marques like Jaecoo and Omoda gaining ground, the game is changing fast.”

 “Legacy manufacturers need to move quickly to protect their market share and adapt to a world where new players aren’t just participating – they’re leading.”

According to Nothard, stakeholders must now align more closely with Asia’s growing role in automotive manufacturing and adapt their sourcing, logistics, and product standards accordingly.

“There’s a risk of being left behind if we don’t adjust to this new reality,” he warned. “European supply is becoming more constrained, while Asia is rapidly expanding.”

He also cautioned against chasing volume at the expense of profitability. “We’ve got to protect margins. That means offering real value to consumers, especially as more people transition to electrified vehicles. Expertise, trust, and infrastructure are going to be absolutely critical.”

In a market defined by flux and fragmentation, Nothard believes adaptability will be the key to long-term success.

“The industry has weathered immense disruption over the past decade,” he said. “What matters now is how we respond to the next wave – because it’s already here.”

British American Tobacco (BAT), the company behind Pall Mall and Lucky Strike, has reported a return to growth in its American business, fuelled by smokeless products.

In a recent trading update, BAT anticipates a resurgence in growth for its combustible products – cigarettes and cigars – in the first half of the year, as reported by City AM.

Meanwhile, its nicotine pouches, Velo Plus, are projected to witness triple-digit revenue growth in the US.

The firm has managed to secure a larger slice of the US tobacco market share, driven by Natural American Spirit and Lucky Strike.Despite an anticipated 2% dip in global tobacco industry volumes, BAT has revised its expected full-year revenue growth from 1% to between 1% and 2%.The company also forecasts new product revenue growth in the low-single digits in the first half of the year, accelerating to mid-single digits for the full year.

However, the robust performance of Velo Plus has been somewhat offset by the impact of “illicit vapour products” in the US and Canada. BAT noted that US legal industry volume is down mid-teens year-to-date.

Tadeu Marroco, Chief Executive, expressed optimism about the company’s progress, stating: “While there is more to do, I am encouraged by the progress we are making through our Quality Growth focus, and prioritising investment to the largest profit pools.”

Ocean Cottages was founded in 2009 with a focus on the North Devon coast including Croyde, Woolacombe and Saunton.

Dan Harrison, commercial director at Classic Cottages, said: “This acquisition strengthens our presence in the South West and adds another outstanding local agency to the Classic family.

“Like us, Ocean Cottages places great emphasis on providing high levels of service to both guests and owners, and we’re delighted to welcome them to our portfolio.”

The deal follows Classic Cottages’ acquisition of Norfolk Holiday Homes in July last year and the purchase of Cat Hole Cottages in the Yorkshire Dales in late 2024.

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The company said the deal was part of parent company Sapphire Holidays’ wider growth strategy, which saw it acquire Grandeur Property Management in Dorset earlier this year.

Sapphire Holidays, which includes Classic Cottages, Aspects Holidays, Boutique Retreats and Unique Hideaways, is the UK’s largest family-run holiday letting agency.

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The group, based in Hayle, in Cornwall, manages a portfolio of just over 2,700 properties nationwide, generating over £60m in holiday bookings annually and employing more than 190 staff, the majority of whom are based in Cornwall.

Simon Lambert, of This is Money, replies: It’s fitting that this question crops up in the week that NatWest, formerly known as RBS, finally fully exited taxpayer ownership.

The two may not seem directly related but the 60 per cent tax trap is a financial crisis hangover. 

Britain’s stake in RBS came about due to the exceptional circumstances of the financial crisis.

Cast your mind back that far and there were also some stringent tax measures brought in to deal with an urgent need to raise funds. Unfortunately, the one you refer to that creates the 60 per cent tax trap is still with us, long after the emergency passed.

In April 2009, Chancellor Alistair Darling announced the personal allowance would start to be removed at a rate of £1 for every £2 earned above £100,000. This created Britain’s highest effective official income tax rate of 60 per cent.

There are other quirks that can drive up marginal tax rates – the amount you pay on the next pound – but they depend on specific related circumstances, whereas the personal allowance removal is baked into the income tax system.

If the £100,000 threshold had moved up in line with RPI inflation, it would now be at £180,000, according to our historic inflation calculator.

The only real way to beat the tax trap is to get your income down and salary sacrifice has become a popular way of doing this, with people in the bracket often paying as much as possible into a pension.

Reports last week suggested salary sacrifice was in the Treasury’s sights, as a way to claw more money in and an official report has been compiled. It remains to be seen whether rumours are true, but you should be careful about making financial decisions based solely on saving tax.

We asked an expert about where you stand on salary sacrificing as much as possible of your pension. 

Anita Wright, chartered financial planner at Bolton James, replies: From a tax perspective, making significant pension contributions via salary sacrifice by the tax year end on 5th April 2026 is likely to be highly beneficial — particularly given your earnings position and the structure of your employer’s scheme.

Since your new total income for the 2025/26 tax year will be £125,000, you fall squarely within the band where the personal allowance is gradually withdrawn.

Between £100,000 and £125,140, your personal allowance (the amount of income you can receive tax-free) is reduced by £1 for every £2 earned above £100,000. This results in a 60 per cent marginal tax rate on income in that range.

Once your income exceeds £125,140, you lose the personal allowance entirely.

By using salary sacrifice to reduce your gross income below £125,000, you will recover some, or all, of your personal allowance, significantly improving your overall tax position.

One of the core tax benefits of your employer’s salary sacrifice scheme is that pension contributions are made fully by your employer, meaning they are exempt from both income tax and employee National Insurance (NI) unlike receiving additional salary.

This typically results in a more efficient outcome than making contributions from your net pay.

In addition, employers also benefit from a reduction in their own NI liability when salary sacrifice is used.

Some employers choose to pass part or all of their NI saving into the employee’s pension plan, thereby boosting the overall contribution at no additional cost to you.

This is worth checking directly with your HR or payroll team, as it depends entirely on your employer’s policy.

Your ability to do this successfully — and how much you may wish to sacrifice — will depend on several factors:

• While you note that you can manage without much of your take-home pay, it’s important to bear in mind that salary sacrifice will reduce your monthly net income — which would otherwise have been higher had you taken the additional salary instead.
• Annual Allowance: For most individuals, the pension annual allowance is £60,000 for the 2025/26 tax year. However, this includes both your contributions and those made by your employer. Contributions above this threshold may trigger an annual allowance charge unless unused allowances from previous years can be carried forward.
• · Impact on Benefits: A reduced gross salary might affect other employment-related benefits. For example, some death in service schemes or income protection policies are based on actual salary. That said, many employers calculate benefits using your notional (pre-sacrifice) salary, but this should be confirmed.
• Borrowing capacity: Mortgage lenders and other credit providers often assess affordability based on income and expenditure. A lower reported income due to salary sacrifice could impact your borrowing potential, depending on the lender.

A salary sacrifice arrangement can be put into place at any point, but must meet the following criteria:

• A formal written arrangement must be in place.
• This must be in place before the salary is actually reduced.

The arrangement must not take your salaried remuneration below minimum wage with regards to the hours worked.

You also must not also be able to demand a switch back to full salary, otherwise HMRC may contend that a valid exchange has not taken place and implement the appropriate tax treatment that you may receive less take home pay.

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Should you worry about salary sacrifice being cut? 

Finally, while current pension legislation offers significant tax incentives, your concerns about potential future changes are entirely understandable.

Although no formal announcements have been made, it is natural for higher earners to consider acting sooner rather than later to optimise the available reliefs under current rules.

It is widely understood that the previous government commissioned a detailed report on salary sacrifice, examining its cost to the Treasury and exploring ways to potentially limit its use.

In parallel, HMRC has recently been modelling hypothetical scenarios to assess how much additional revenue could be raised through reform.

This suggests that salary sacrifice is firmly on the policy radar — and may well be considered by the current Chancellor as part of a broader effort to increase tax revenues. While no decisions have been made, the direction of research implies a growing likelihood that changes could be introduced in the next Budget.

Lookers has agreed to a takeover by the owner of Canadian motor dealer group Alpha Auto in an all-cash deal valuing the British firm at £465.4million.

At 120p per share the deal represents a 35.3 per cent premium to Lookers’ closing price of 88.7p on Friday and a 48.3 per cent premium to the volume weighted average price over the last 12 months.

Lookers bosses have unanimously recommended shareholders vote in favour of the deal, which its chairman says will ‘protect stakeholder interests’ while ‘supporting our customers, operations, communities’ and staff.

Lookers shares soared 33.9 per cent to 118.8p in early trading, bringing 2023 gains to 51.6 per cent.  

Privately owned and Toronto-based Alpha Auto operates 15 large scale new vehicle dealerships across Canada and the US.

The bid comes via Global Auto Holdings, a holding company ‘related party to, by having the same ultimate beneficial owner as, Alpha Auto Group’. 

The firm says the deal represents an ‘attractive opportunity’ to enter the UK market via ‘one of the leading integrated automotive retail and service groups in the UK with significant competitive advantages’.

The group will also benefit from Lookers’ relationships with original equipment manufacturer (OEM) partners in the UK and Ireland, it said.

The enlarged group will also have ‘additional balance sheet capacity and access to capital’, thanks to its greater size and ability to generate cash flow.

This, it says, will help fund further growth in the UK and beyond.

Lookers has grown strongly in recent years, having achieved operating profits of £109million in 2022, up from £71million in 2018.

Altrincham-based Lookers said Alpha Auto’s bid ‘represents an attractive opportunity’ for shareholders ‘to accelerate and de-risk this value creation opportunity and realise an immediate cash exit for their investment at a significant premium to the prevailing share price’.

It added that shareholders must also bear in mind the ‘inherent cyclicality in the auto retailing market [and] a significant ongoing structural transformation towards electric vehicles’.

This is in addition to other factors ‘such as inflation, macro-economic uncertainty, development of overseas supply chains, and structural changes to the distribution model, which create uncertainty for the medium-term market outlook’.

Alpha Auto, represented by bidding company Global Auto Holdings, has already got the backing of Lookers investors representing 160,655,505 shares and 42.1 per cent of its issued share capital.

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Subject to regulatory approval and the required volume of remaining Lookers shareholders voting in favour, the deal is expected to complete in the third or fourth quarter of this year.

Interim Chairman of Lookers Paul Van der Burgh said: ‘The significant financial and operational progress made by Lookers in recent years demonstrates Lookers’ ability to deliver excellent and sustainable value for our stakeholders.

‘After a period of extensive engagement between the parties, the Offer represents an attractive opportunity for our shareholders to realise cash now for their investment at a significant premium to the prevailing share price.’

Lookers chief executive Mark Raban added: ‘We have harnessed our strong market position, enhanced our brand relationships, and executed well against our six strategic priorities.

‘[The deal] will create a business of greater scale, and bring together two successful businesses with complementary OEM relationships, and a strong platform to support future growth in the UK.’