New car prices. 19% increase in 5 years

According to the German automobile club ADAC, the price of new cars has increased by 19% since 2017 across the Rhine. This increase, which varies by segment, goes up to 44% for small city cars. It is also observed in France and outside Europe. But how to explain it?

By

Max K

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According to a study, new car prices have increased by an average of 19% between 2017 and 2022.

Renault Maisons-Laffitte


If you regularly read Argus, it will not have escaped your notice that new car prices are now rising at an almost monthly rate, an unprecedented frequency as a result of an unprecedented acceleration over the past two years. No manufacturer, no segment, no model escapes it, even if the increase is not the same everywhere. According to a study by the German automobile club ADAC, average list prices increased by 19% between 2017 and 2022. The increase even reached a record 44% in five years in the small city car segmentthe cheapest models on the market.

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In gray inflation, in yellow the price of new cars.

ADAC

The price of electrification

Many factors of increasing design and production costs partly explain the price increase. First, the development of environmental regulations pressures manufacturers to electrify their vehicles when the addition of already expensive pollution control systems is not enough. However, a hybrid engine or an electric drivetrain costs more than a pure thermal mechanism. Thus, the Fiat 500 100% petrol of 69 hp showed €12,990 in mid-2019 in Pop finish was replaced at the beginning of 2020 by a micro-hybrid variant shown at €14,990 with the same equipment level, i.e. more than 15% of rise overnight.

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Fiat 500 pink

The switch to micro-hybrid was synonymous with an increase of €2,000 for the Fiat 500.

Fiat

Rising costs…

Adding to the electrification was the shortage of semiconductors, which has been running since the industrial disruptions related to the 2020 coronavirus pandemic, then the war in Ukraine, which has affected the manufacturers’ supply chain since last February, and finally the sharp increase in energy and raw materials. prices. The Volkswagen Golf, the best-selling car in Europe year after year, started at €27,540 in France in December 2020 (1.0 TSI 110 Life 1st) and today claims a minimum of €30,685 (1.0 TSI 110 Life Business).

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gray volkswagen golf

Volkswagen no longer offers a new Golf for less than €30,000 in France.

volkswagen

ADAC notes that since margins on small cars are low due to a price that must remain attractive, while the most luxurious models generate the largest profits, the higher the interval, the lower the inflation. The less fortunate motorists are therefore proportionately punished the hardest. The institution indicates an increase of 21.3% for compact models and “only” 12.4% for luxury cars between 2017 and 2022. Prestige manufacturers therefore appear to be amortizing part of the costs in their margins. But they also benefit from an increase in their own demand and still manage to increase their annual sales volume.

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ADAC price per  segment

Increase in car prices between 2017 and 2022 by segment, from smallest (top) to largest (bottom).

ADAC

…does that explain everything?

If the increase in prices strictly reflected the increase in costs, producers’ margins should remain unchanged. Gold many of them have announced record profits in recent months, boasts of selling less but more expensive. In the first half of 2022, the Stellantis group announced a profit of 34% compared to the same period in 2021. The Renault group, if losing money, still increased its margin by 2.6% in the same interval. Also in the first six months of this year, Volkswagen Group profits increased by 25.8% despite a 14% drop in sales. The removal of entry-level versions of certain vehicles also contributes to the price increase.

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Mercedes E-Class Cabriolet red

In addition to high margins, premium builders benefit from continued strong demand.

mercedes

According to ADAC, manufacturers are also playing on the support allocated to the purchase of electric cars to maximize the margin that can be achieved. The organization emphasizes, for example, that the Dacia source appears €22,550 in Germany, where its ecological bonus amounts to €6,000, while it costs €19,800 in France, where its bonus is limited to €5,346. The price difference between French and German buyers is therefore around €1,000 including bonus (French advantage), while it is €2,450 in the catalogue, the difference seems to be borne by the German state, which also applies a VAT of 19% against 20%. in France. It should be recalled that the Spring was launched in France at a price of €16,990 in the spring of 2021, a price which has therefore increased by around 16.5% in just over a year.

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Dacia spring blue

Are builders using green bonuses to increase their profits?

Dacia

An international phenomenon

ADAC has noted the price increase of certain models of different segments in Germany between 2021 and 2022. The most important one on this list concerns the Dacia Sandero Stepway TCe 90, whose price has increased by 19.9%. The Peugeot 208 BlueHDi 100 took 15.2%, in the middle of the ranking, while the BMW 116i is one of the models whose price has increased the least with a still 11.3% increase.

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Peugeot 208 yellow

Small cars are most affected by price increases.

Peugeot

This phenomenon is far from limited to Europe. Especially in the US, where the car trade works differently (taxation and otherwise integrated costs, greater freedom for distributors, etc.), Kelley Blue Book analysts noted that the average sales price of new cars had broken a record by reaching $48,182 in July 2022 , up 11.9% year over year and even 41.4% compared to the $34,077 that Edmunds listed in 2016. Mechanically, this difficulty in accessing the new home market leads to a sharp increase in used prices, which in turn penalizes drivers with the lowest means. The question now is how long this inflation will and can last.

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