It’s one thing to say that car prices have gone up a lot; knowing how much is something else. During an investigation, the AAADATA company gave me the figure: between the first half of 2019 and this year, ie. between before and after Covid, the average selling price of a new car went from €26,775 to €32,446.
I had already dealt with car price inflation here, but there is a runaway: a little more than 20% inflation in three years. In 2010, this average price was just under €20,000…
Even the Dacia Sandero was expensive: in three years it went from €8,500 to €11,000 in its basic version.
What is new is that this inflation, as opposed to enrichment, trickles down:
To begin with, the drop in new cars dried up the market for the latest pre-owned products and, combined with the increase in delivery times, caused their prices to rise. Then the increase gradually trickled down to the bottom of the market. Old stuff that wasn’t worth €1,000 pre-Covid trades for €3,000 and a friend confided in me that he had taken €5,000 from his mum’s dented Toyota (21 years old and 120,000km) which he hadn’t managed to getting rid of half that less two years earlier.
The scrap CAP
Another anomaly, in August more cars over 15 years old were sold than new ones: 96,000 against 91,500.
It is clear that cars that were previously scrapped as part of the conversion premium are now finding takers because today they are often worth more than €1,500 or €3,000 in CAP.
Used buyers laugh less. On a well-known classifieds site, it is difficult to find a decent compact family car for 10-12 years around 100,000 km under €7,000. There are really only choices between €7,000 and €10,000.
Equally confusing, three-year-old cars show up at their new 2019 price.
The power to set prices…
I know it all stems from the Covid pandemic and then the war in Ukraine, shortage of components and then skyrocketing energy prices.
But as far as I know, the Taiwanese microprocessor factories of TSMC like those of Samsung in Korea are running at full speed again.
What remains relevant is an Anglicism that manufacturers discovered during the shortage: pricing power, the power to fix prices, a fabulous thing, the marketer’s grail that makes it possible to cross two curves: the decline in sales and the growth in profits. It is clear how to earn more while selling less.
To the end of the price war, the discounts, promotions and discounts, VD (demonstration cars) that ended in “used 0 km”, the sale to rental companies and agents, the flow of advertising and all these commercial distortions which nibbled the margin.
“Pricing power”, how do you say it in Chinese?
I’m not saying there is a consensus among manufacturers to maintain high prices, but no doubt an implicit consensus to no longer aim for large volumes which require “pushing the sheet metal” into showrooms at all costs.
How could they anyway? The materials of the electric transition, lithium and rare metals, do not flow freely like those of the 20th century automobile, steel, aluminum and plastic.
This is why I hardly believe the oft-heard predictions of a return to normal prices before the end of 2023. And also for two additional reasons.
On the new side, in order to sell electric cars at their right price, it is important not to offer thermals that are too cheap…
Even less so when the government favors the latter by lowering fuel prices while electricity prices threaten to explode.
On the used side, no further improvements are in sight because the slump in new cars over the past three years will have lasting effects: the hundreds of thousands of cars that have not been produced for nearly three years will be missing from the market too much long time.
In short, the car is becoming a luxury product and we do not yet measure all the social, political, demographic and geographical consequences…
But already an economic fallout: in 2022, sales in France of the Chinese manufacturer MG increased by 98%, and European imports of cars (LCVs, buses, trucks) from China increased by 150%, reaching 500,000 units, and their value has been multiplied by three.
How to say pricing power in Mandarin?