Economy. The car becomes a luxury product

The private car, an outward sign of wealth? If certain luxury brands have made it their specialty for ages, the models of Mr. and mrs. Everybody in the process of becoming luxury products as their purchase prices have become prohibitive. It is necessary to pay an average of 26,000 euros to acquire a new four-wheel drive. This is 35% more than ten years ago, according to the statements of “Argus”.

This price increase has accelerated significantly over the past three years, as new cars are sold for 15% more than in 2019. All series are affected, according to the latest statements from Emil Frey, the leading network of dealers in ‘Hexagon. At BMW, the 1 series has seen its price increase by 1,750 euros since October 2021. At Stellantis, the petrol Peugeot 208 has increased in price by 2,670 euros in two years. In the SUV category, the 3008 took 250 euros in seven months (32,600 euros). And if Tesla is the champion in all categories of sky-high prices (plus 6,000 euros for its Model 3 to almost 50,000 euros), even Dacia, Renault’s low-cost brand, knows this waltz of brands. It requires 800 euros more than in October 2021 to afford a new Sandero (10,790 euros).

Too much improvement

In a context of inflation of more than 5% in 2022, Mobilians, another dealer network, observes “a clear correlation between the evolution of household purchasing power and the evolution of catalog prices”. So much so that the median age of an individual buyer of a new model now reaches the sixty threshold.

To explain this increase, manufacturers blame everything on the health crisis and its overlapping consequences. According to a now-familiar vicious circle: the disorganization of supply chains due to containment and production stoppages (almost three-quarters of electronic components come from Asia) has triggered a shortage of raw materials, the effects of which have only been exacerbated by the resounding recovery of consumption in China, Europe and North America, at the end of 2020, then of the war in Ukraine, all this caused an increase in production costs and thus in sales prices. Added to this is the forced advance for the electrification of transport in the EU, which in itself creates tensions about certain raw materials and materials necessary for the sector. The big bosses of the builders are taking turns asking for more and more public support to support a sector in crisis.

Is it real? Given the profits for 2022, we can doubt it. It has been around ten years since the sector changed its model. Schematically, the strategy was to flood the market with cars produced at low cost to compensate for the low margin per unit. vehicle, a model modeled by Carlos Ghosn, followed by the policy of the high-margin model first, with a rainstorm of d options and built-in digital tools, to compensate for the drop in sales with the revenue achieved by each of these high-tech cars sold. If Elon Musk opened the way with Tesla, combining digital and electric, Carlos Tavares took the wheel and excels. Under his leadership, Stellantis generated 13.4 billion euros in profits in 2021, while the new group born from the merger of PSA and Fiat produced 1.7 million vehicles less than expected in the same period.

A market driven by demand

Ironically, the shortage is on the way to multiplying this commercial strategy, which aims to empty the buyer’s wallet more and more. “We’ve gone from a market driven by supply to a market driven by demand, without discounting, with high pricing power (a brand’s ability to increase its prices – Ed)”, enthused Carlos Tavares recently, happy to see the brands from Stellantis in the USA reaches the highest average sales price on the market: around 44,000 euros. Since the fall of Ghosn and the arrival of the Jean-Dominique Senard-Lucas De Meo duo, Renault has also entered it, generating 800 million in profit in 2021. Since then, if the diamond brand has seen its global sales increase collapse by 17.1 % between the first quarters of 2021 and 2022, its revenue limited the damage to -2.7% over the year, thanks in part to an increase in the prices of all its models.

It remains to be seen whether the (last) car buyers will be able to keep up with this organized inflation much longer. Again, let’s look at Carlos Tavares. The latter envisages that in 2030 Stellantis will be driven by its electric vehicles (52% of sales, against 26% for hybrids and thermals), but also by its software activities (7%, 20 billion euros in 2030) and by its new mobility services in a very broad sense (6%).


In numbers

+13% The drying up of supply causes prices on the used market to skyrocket between the end of 2019 and March 2022.
-10% Icon arrowIt has fallen in sales of new cars in France over a year. 16.62% over the first five months of 2022.
+738% Icon arrowThe price of lithium, essential for car batteries, exploded from January 2021 to March 2022.
3.3 billion euros Icon arrowThis is for 2021 what Stellantis has paid to its shareholders. Dividends are included in the price of cars.

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