Buying a brand-new car is becoming more difficult than ever. In addition to the availability problems generated by supply chain constraints and the lack of semiconductors, people looking for a new car face a significant price increase.
It’s not just about which car to choose and how long to wait for it. It’s also about how much more you’ll pay for the same car that you could have afforded a just a few years ago.
The situation is quite complex, especially in Europe and the United States. Research conducted by JATO Dynamics indicates that the average retail price (excluding any type of discount, promotion, or public incentive) for gasoline vehicles available in the United States rose 14 percent between 2015 and 2022. According to the company advisory, the price jumped from $39,143 in 2015 to $44,641 this year. That’s more than $5,000 in just seven years.
Internal Combustion Cars And Monstrous Price Increases
Throughout many European countries, the growth was more significant. Across Germany, Italy, France, the United Kingdom, Spain, the Netherlands, and Norway, the average price of a new car was €35,500 ($36,037) in 2015. This year, up to June, the average retail price of available cars was €44,101 ($44,769). That a significant increase, which reflects how much attention manufacturers are giving to higher-priced automotive segments.
In countries such as Norway, for example, the change was particularly significant with prices skyrocketing from €42,199 ($42,838) to €68,677 ($69,707). It’s an increase of 63 percent, and is the result of legislation that clearly intends to eliminate the sale of internal-combustion cars. In other markets such as the UK, the devaluation of the British pound accelerated the price increase, from £32,247 ($37,409) in 2015 to £46,230 ($53,631) by the end of June 2022.
In contrast, the Chinese market has only seen a small 5 percent increase in recent years, mainly as supply has expanded into the lower segments. Micro cars and smaller SUVs contributed to a modest price increase between 2015 and 2022.
Electric Vehicles Are Not Yet An Alternative
While buying gasoline-powered cars is now much more challenging for a large section 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 cannot afford most of the battery-powered models available today. Were it not for the incentives offered by some governments, the situation would be very different for the growth in demand for these cars.
In general, a motorist has to pay up to €55,821 ($56,666) for a new electric car in Europe. It’s even more in the US at $63,864 in the US, which China is cheaper $31,829 in China. Barring the big gap between the latter and the West, the reality for consumers is that electric cars are still not a serious cost-effective alternative to rising gasoline car prices.
Brands selling in Europe and the US have positioned their electric vehicles as premium cars, focusing on the high-end segments. Most of the offerings found in these markets are in fact luxury sedans and SUVs, although this trend has started to change with the introduction of less expensive cars, such as small SUVs, city cars, and utility cars.
As a result, the industry and consumers face the great challenge of banning polluting cars and promoting clean ones, while at the same time providing a real cost-effective solution for the masses. China is doing so. The West should pay attention.
The author of the article, Felipe Munoz, is JATO Dynamics Automotive Industry Specialist.