According to figures from the Society of Motor Manufacturers and Traders (SMMT), output surged by 7.6% in July on the same time last year to hit 126,566.
The number of cars built totalled 1,023,723 in the first seven months of the year, the first time the one-million milestone was reached in July since 2004.
Growth was up in both foreign and domestic markets, with observers commenting that demand for British models remains high all over the world.
Exports were up by 6% last month, with a 14% rise in output for the domestic market.
More than three-quarters of a million cars built in the UK this year were for overseas markets - almost four out of five of all cars manufactured.
Mike Hawes, chief executive of the SMMT, said the rising productivity levels come as a consequence of the increased investment made by manufacturers.
“UK car production in 2016 is booming, with new British-built models in demand across the world,” he said.
“Manufacturers have invested billions to develop exciting new models and produce them competitively here in the UK.
“Future success will depend on continued new car demand and attracting the next wave of investment so Britain must demonstrate it remains competitive and open for business.”
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But it is not only the market for new cars that is in a strong position right now, as separate figures have shown that second-hand sales figures have never been higher either.
More than 4.18 million used vehicles were sold in the first half of 2016, representing a rise of 8% on the same period last year, the SMMT data shows.
It is the first time ever that second-hand sales figures have broken the four-million mark.
Commenting on the car industry’s rising productivity, Business and Energy Secretary Greg Clark said it was a testament to the expertise of the British workforce.
"Our automotive sector continues to go from strength to strength thanks to our highly-skilled workforce and long-term investment in new technology and innovation,” he said.