The UK could unlock billions of pounds in funding over the coming years as manufacturers opt for British-built components to aid the switch to electric vehicles.
New analysis published by the Society of Motor Manufacturers and Traders (SMMT) shows that the automotive industry could secure a £4.6billion boost to domestic manufacturing.
Demand for automotive parts sourced in the UK is expected to rise by 80 per cent by the end of the decade, with experts describing it as "one of the biggest opportunities in a generation".
The SMMT reported that "significant opportunities" already exist to support the production of next-generation electric and other vehicle technologies.
As part of the Government's DRIVE35 project, there are hopes that more than 1.3 million cars and commercial vehicles will be produced in the UK by 2035.
Investment boosted by DRIVE35 aims to double annual investment in UK advanced manufacturing from £21billion to £39billion.
This will coincide with a huge push to manufacture electric vehicles in the UK over the coming years, with seven new electric models expected this year.
This has been headlined by Nissan beginning production of its next-generation Leaf at its Sunderland facility last December, backed by £450million in funding.
Experts have highlighted that the UK could generate £4.6billion through automotive production over the coming years
|NISSAN/PA
Nissan has already invested billions of pounds in the UK to improve its production facilities, including transforming Line Two to enable electric vehicle manufacturing.
With a strong focus on producing electric vehicles in the UK, the SMMT suggests that demand for electric motors, power electronics and drive systems will surge by more than 350 per cent by 2030.
Demand will also soar for automotive electronics, given the desire for vehicles to be more technologically equipped with heads-up displays.
Mike Hawes, chief executive of the SMMT, said: "The UK automotive sector is transforming at pace, and for companies looking to invest in Britain the opportunities are clear.
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Production of the new Nissan Leaf started in Sunderland at the end of 2025 | NISSAN"We have the skills, the innovation and the industrial base built on the billions already invested into Britain by global brands.
"With a modern, long-term industrial strategy - with automotive at its heart - the UK is a safe and stable destination for automotive investment amidst fierce global competition, increasing protectionism and geopolitical upheaval."
The transition to electric vehicles will also result in triple the demand for battery-related localisation, including battery packs, modules and cells.
The connected and automated mobility (CAM) market also presents a major opportunity for the UK, with the supply chain estimated to reach £24billion by 2040.
Waymo has launched trials of its self-driving vehicles across London
| REUTERSConsecutive governments have touted the benefits of self-driving vehicles, with estimates stating that the industry will be worth £42billion by 2035 and create up to 38,000 jobs.
Trials of self-driving taxis are already in operation across London, with brands like Uber, Lyft, Waymo and Baidu all looking to roll out revolutionary technology in the near future.
Business and Trade Secretary Peter Kyle added: "The UK is a top investment destination, and the SMMT's leadership continues to highlight the scale of opportunity for investors to back our historic automotive industry and help secure the UK's position as a thriving advanced manufacturing hub.
"Through our modern Industrial Strategy, we're backing auto firms with the largest Government investment in the automotive industry in the post-war era, helping to create tens of thousands of jobs and attracting billions in private investment through the DRIVE35 programme."