Buying a brand-new car is becoming more difficult than ever. In addition to the availability problems generated by the supply chain constraints and the lack of semiconductors, people looking for a new car are experiencing a considerable price increase.
It is not only about which car and how long you have to wait for it; it is also about paying more money for the same car you could afford some years ago.
The situation is quite complex, especially in Europe and the United States. A research conducted by JATO Dynamics indicates that the average retail price (excluding any kind of rebate, discount or public incentive) for petrol passenger vehicles available in USA soared by 14% between 2015 and 2022. According to the consultancy firm, the price jumped from €39,143 in 2015 to €44,641 this year. That’s more than €5,000 in just 7 years.
Petrol cars and monstrous price increases
In Europe* the growth was more significant. Buying a brand-new petrol car cost €35,500 in 2015. This year through June, the average retail price of cars available there was €44,101. This is a massive increase that reflects the focus of car makers on upper segments.
In countries like Norway for instance, the variation was enormous, with prices jumping from €42,199 to €68,677. The regulations that clearly intend to eliminate the sales of ICE cars explains this 63% increase. In other markets like the United Kingdom, the devaluation of the British Pound accelerated the hike on prices, from €32,247 in 2015 to €46,230 by the end of June 2022.
In contrast, the Chinese market has seen a tiny 5% increase over these years mainly because the offer has expanded downwards in the segments. The micro cars and smaller SUVs contributed to the contained increase between 2015 and 2022.
EVs are not an alternative yet
If petrol cars are now less affordable for a big part of the population, their electric counterparts aren’t in a better position. Except for Norway and in some cases China, the rest of the world still can’t afford most of the electric models available today. If it wasn’t because of incentives offered by some governments, the situation would be quite different for the demand growth of these cars.
In general, a consumer needs to pay up to €55,821 to get a brand new electric car in Europe, €63,864 in USA, and €31,829 in China. Excluding the big gap between the latter and the West, the reality for consumers is that electric cars are not yet a serious affordable alternative to the rise of prices of petrol cars.
The brands selling cars in Europe and USA have positioned the EVs as premium cars, focusing on high-end segments. Most of the offers you find in these markets is composed of luxury saloons and SUVs, although this has started to change with the introduction of more less expensive cars, such as small SUVs, city-cars and subcompact hatchbacks.
Consequently, the industry and its consumers face the big challenge of banning polluting cars and promoting clean ones, and at the same time provide a real/affordable solution for the masses. China is doing so, the West should pay attention.
*Germany, Italy, France, United Kingdom, Spain, Netherlands and Norway
The author of the article, Felipe Munoz, is an Automotive Industry Specialist at JATO Dynamics.