SMMT chief executive Mike Hawes predicted that auto production will reach an all-time high before 2020, but he sounded a note of caution after revealing that investment by the industry fell to £1.66 billion last year, compared with £2.5 billion in previous years.
Carmakers had lobbied hard against Brexit, saying that it could result in the imposition of export tariffs that would make United Kingdom plants uncompetitive.
Around 1.7 million cars rolled off production lines last year, an increase of 8.5% over the previous year, with exports reaching a record 1.35 million.
However, investment in the sector dipped, with United Kingdom manufacturers announcing planning spends of £1.66bn compared to £2.5bn in 2015.
"The tremendous growth in United Kingdom production is testament to the global competitiveness of the United Kingdom automotive sector, says SMMT chief executive, Mike Hawes".
The imposition of tariffs would be "a red line for the industry", he said. Britain now averages 41 percent.
Around eight out of every 10 cars manufactured in the United Kingdom is now exported, bound for one of 160 markets worldwide.
"It would be very hard to overcome that level of additional cost, given that plants operate on wafer-thin margins", Hawes said, adding that carmakers generally make only a 2-4 percent return on investment. "Failure to do so could damage United Kingdom automotive manufacturing beyond fix".
The viability of the vehicle industry was at stake, said Mr Hawes, adding that if tariffs were imposed after the United Kingdom leaves the single market, the price of cars could increase by £1,500.
After receiving private guarantees from the British government, Nissan CEO Carlos Ghosn had in October given the green light to fresh investments at the carmaker's plant in Sunderland in northeast England.
A source told Reuters that the decision had been made after a government pledge for extra support to counter any loss of competitiveness caused by Britain leaving the European Union, though a spokesman for the Prime Minister said that no explicit promises had been made on compensation for tariffs.
Most of last year's growth in vehicle production was because of continuing economic recovery across Europe, Mr Hawes said.
Jaguar Land Rover increased production by 11 per cent a year ago to 544,000, Nissan's rose by 6.5 per cent to 507,000, the Mini Cooper by 4.9 per cent to 210,000, and Honda by 12 per cent to 134,000. Germany, Italy and France are the biggest buyers, between them accounting for 47.2 percent of cars bought within the bloc.