UK Car Market Growth vs EV Slowdown: Asset Valuation Implications (2026)

What February 2026 registrations signal for asset values, risk, and lending decisions

The UK car market delivered a strong start to 2026, with February new car registrations reaching their highest level in over two decades. Yet beneath this headline growth sits a more nuanced, and potentially more consequential, story for insurers, lenders, investors, and asset-backed financiers: the transition to electric vehicles (EVs) is showing signs of strain.

From an asset valuation perspective, this divergence between overall market strength and EV adoption slowdown raises important questions around residual values, portfolio risk, and future asset performance.

February saw over 90,000 new vehicles registered across the UK, marking a 7.2% year-on-year increase and the strongest February performance since 2004. Growth was largely driven by fleet demand, alongside a notable rebound in private buyer activity.

However, while the total market expanded, EV growth lagged behind. Fully electric vehicles accounted for 24.2% of registrations, down from 25.3% the previous year, despite a modest increase in absolute volumes.

This signals a key shift: EV adoption is continuing, but not at the pace required to keep up with the broader market.

At Hickman Shearer, we view market movements through the lens of asset performance and long-term value. The current dynamics present several implications:

1. Residual Value Volatility Increasing

A slowing EV adoption curve introduces uncertainty into residual value forecasting. While EVs have historically benefited from strong demand and policy support, softer-than-expected uptake could:

• Increase depreciation risk for certain models

• Create divergence between high-demand and low-demand EV segments

• Lead to greater variability in secondary market pricing

For lenders and lessors, this adds complexity when underwriting future value assumptions.

2. Internal Combustion Engine (ICE) Assets Showing Short-Term Resilience

The relative slowdown in EV market share is, in part, being offset by continued demand for petrol and hybrid vehicles.

From a valuation standpoint, this suggests:

• ICE vehicles may retain value more strongly in the near term than previously forecast

• Hybrid vehicles could act as a “bridge asset class,” benefiting from both demand stability and regulatory alignment

• Existing fleet portfolios may experience less immediate value erosion than anticipated

However, this resilience must be balanced against longer-term regulatory pressures.

3. Regulatory Risk Is Intensifying

The UK government’s Zero Emission Vehicle (ZEV) mandate requires manufacturers to meet a 33% EV sales target, or face significant financial penalties.

With EV market share currently below this threshold, manufacturers are likely to respond through:

• Increased discounting or incentives on EV models

• Strategic adjustments to production and supply

• Potential shifts in fleet sales strategies

For asset-backed portfolios, this introduces a layer of artificial pricing pressure that may distort true market value.

4. Fleet Dominance Is Shaping the Market

Fleet demand continues to be a primary driver of registrations, reinforcing its influence on vehicle values and lifecycle patterns.

Fleet-heavy markets tend to:

• Accelerate asset turnover

• Create predictable, but sometimes compressed, residual value curves

• Increase exposure to bulk remarketing risks

Understanding fleet composition and disposal timing is therefore critical when assessing portfolio value.

The Underlying Frictions Slowing EV Adoption

Several structural factors appear to be contributing to the slowdown in EV market share:

• Ongoing concerns around charging infrastructure availability

• Higher upfront purchase costs compared to ICE equivalents

• Uncertainty around long-term battery performance and replacement costs

• A pull-forward effect from strong EV demand in early 2025

These factors are not temporary, they represent systemic challenges that will continue to influence valuation models.

Strategic Implications for Asset Owners

For insurers, lenders, and investors, the current market conditions reinforce the importance of a dynamic, evidence-led approach to valuation.

Key considerations include:

• Reviewing residual value assumptions across mixed powertrain portfolios

• Stress-testing EV-heavy exposures against slower adoption scenarios

• Monitoring manufacturer behaviour, particularly pricing strategies linked to regulatory compliance

• Differentiating between asset types, rather than applying uniform depreciation models

In a market where policy, technology, and consumer behaviour are evolving simultaneously, static valuation approaches carry increased risk.

Looking Ahead

The UK automotive sector remains fundamentally strong, but the transition to electrification is proving more complex and less linear than anticipated.

For asset valuation professionals, this is not simply a story of growth or decline. It is a story of divergence.

And in divergence lies both risk and opportunity.

At Hickman Shearer, we provide independent, data-driven asset valuations that help clients navigate changing market conditions with confidence. If you would like to discuss how these trends may impact your portfolio, please get in touch.

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