Buying a car becomes a luxury

Cologne Even the Dacia Sandero is just under the 10,000 euro hurdle. Since the beginning of the year, the price of the Romanian small car has increased by 1,610 euros to 9,600 euros. Nevertheless, the five-door is still the cheapest new car on the German market – but only because the competition has grown at least as fiercely.

The Dacia is not an isolated phenomenon, but the symptom of a broader trend. The ADAC recently took a close look at the price development over the past five years. The result: Today, new cars cost up to 44 percent more than in 2017. The average price of all brand-new cars has also risen: five years ago it was 44,908 euros, in July this year it was 53,535 euros. This corresponds to an increase of 19 percent. That is eleven points more than the level of inflation over the same period.

A good part of the increase is attributable to the current year. The main reason for this is the production bottlenecks in the wake of the Corona crisis and the Ukraine war. “The current supply chain problems are almost a stroke of luck for the auto industry,” says auto expert Ferdinand Dudenhöffer.

Because Corona, the chip crisis and the Ukraine war are causing the supply of important components and materials to falter, manufacturers can build far fewer vehicles than they can sell. And scarce goods are expensive. “Automakers can currently sell the few vehicles they have available at high prices. The discounts that have been common for decades have been significantly reduced,” says Dudenhöffer.

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Small cars in particular have become expensive. According to ADAC data, new car prices rose by 44 percent in the small car class, by around 30 percent for small cars and by around 21 percent in the compact class.

The reasons are likely to include the introduction of new minimum standards for assistance systems. Delivery problems, lack of semiconductors and increased purchase prices can also play a role.

Small cars are hard to come by

In addition, many manufacturers have removed the low-cost basic versions of their models from their range, vehicles with low engine power and a low level of equipment. A year ago, customers could still order a Golf with 66 kW/90 hp for 20,700 euros, now the portfolio starts at 96 kW/130 hp for 29,560 euros. This is no coincidence: the industry currently builds and sells mainly models with high margins – i.e. expensive vehicles with a lot of equipment, also e-cars that improve their own CO2 balance. Inexpensive small cars without extras are currently hard to come by. Or only with very long waiting times.

And even in the larger vehicle classes, those who choose a strong and lavishly configured model usually have their new car faster. The supply chain problems have defused recently, the peak of the chip crisis seems to be over. The car manufacturers are currently working off their accumulated orders and are selling new cars at high prices.

>> Also read: Expensive is not always good – how car manufacturers save on materials

Dudenhöffer expects production to accelerate sharply in the coming months. In June, 21 percent more cars were already being built than in the same month last year. “In a few months, leaky supply chains will no longer be the problem, but a significantly declining willingness to buy,” says the expert.

For consumers, however, the increase in supply does not necessarily mean financial relief. The CAR manager expects list prices to rise over the next few months due to high raw material costs. Electric cars in particular are likely to become more expensive.

Luxury strategy at Audi and Mercedes

And in the long term, new car prices may also tend to go up. Because many manufacturers are swinging from a mass to a luxury strategy. First and foremost the German car manufacturers: Mercedes, for example, wants to focus even more consistently than before on luxury. A large part of the future development investments in the passenger car sector should flow into the top models of the brand, while in the entry-level segment it will be thinned out.

The “Entry Luxury” vehicles should serve as an entry into the Mercedes world, which should include the successors to the current A and B classes, which, thanks to more complex technology, are positioned significantly higher in terms of prestige and price than their predecessors.

The aim of the luxury strategy is higher profitability in an increasingly difficult market. Mercedes is aiming for a return on sales of 14 percent by the middle of the decade. The shift to direct sales should also help here. By 2025, around 80 percent of sales in Europe should be made through this channel.

>> Also read: No car at any price – The manufacturers’ winning party could end soon

The people from Stuttgart are not alone: ​​Audi is also making cutbacks at the bottom of the model range. And even a high-volume brand like Ford wants to reposition itself in the future and in Europe, in addition to the commercial vehicle business, primarily focus on models like the Mustang and Bronco, which stand for “freedom and adventure”. Bread and butter cars like Fiesta and Focus are more likely to fall out.

What that could mean can currently be seen in the prices of the electric Mustang Mach-E. Within a year, these have increased by around 16,000 euros, offset only by small increases in equipment. Anyone who wants to buy the e-SUV now has to invest at least 63,000 euros – a price from the luxury class for which there would have been three compact Ford Focus models with petrol engines just a few months ago. Today it’s more like two plus a basic Ford Fiesta.

Against this background, the ADAC is calling for a rethink in the industry: the club believes that people with limited financial resources should also be able to afford a new vehicle.

Purchasing a used vehicle, however, is only an alternative to a limited extent. Because prices there have also recently risen sharply. Even with car subscriptions, re-imports or willingness to compromise when choosing a model, not too much can currently be saved. It is therefore currently even more economical than usual to continue driving the old car for a while.

More: E-cars are significantly more expensive: 5385 euros price increase in one year

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