I think you're missing the implicit point - car manufacturers operate on massive scale and razor thin margins. So you have 4 real options -

1. Massively deregulate, in which case the UK might be a good place for R&D but still not for manufacturing (disadvantageous tariffs to their largest export markets and a second tier domestic market, cars exported would be designed to meet foreign standards anyway).

2. Regulate about the same as other key markets, this is what you'd normally do by default as a country, you get decent safety standards, but costs will be high, because the automotive manufacturers will design for major markets, not the UK, so they'll see extra costs associated with UK regulatory compliance, but all products sold in the UK will match EU standards anyway.

3. Just adopt EU standards. It makes operating in the UK cheap for automotive companies, you can use it to argue for tariff reductions with the EU, but a small group of psychopaths in the UK parliament will collapse the entire government and economy.

4. Have higher standards than elsewhere, likely locking the larger manufacturers out of the UK market entirely, opening the door for smaller, higher cost niche manufacturers, but significantly slowing adoption.

Obviously number 3 is the economically advantageous option, but the politically advantageous option is to loudly claim you're doing option 1, whilst in reality doing option 3.

Their point is the UK is too small of a market by itself. I have some doubts about that analysis though given California effectively drives so much of the US car market and it's 30 million people smaller than the UK in terms of raw population, though it's also roughly even in terms of car sales each year.

People commenting that UK can't force big manufacturers to adapt to their regulations seem to forget that they drive in the right side of the car. Pretty big adaptation there no?