Buying a new car has become more difficult than ever. In addition to availability issues posed by supply chain constraints and a lack of semiconductors, people looking for new cars are facing significant price increases.
It’s not just about which car to choose and how long to wait for it. It’s also about how much more you would pay for the same car you could have bought a few years ago.
The situation is quite complex, especially in Europe and the United States. Research conducted by JATO Dynamics shows 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 company advisors, prices jumped from $39,143 in 2015 to $44,641 this year. That’s over $5,000 in just seven years.
Internal Combustion Cars And Horrible Price Rise
In many European countries, the growth is more significant. Across Germany, Italy, France, the UK, Spain, the Netherlands and Norway, the median price of a new car was €35,500 ($36,037) in 2015. This year, through June, the average retail price of a car available was €44,101 ($44,769). That’s a significant increase, reflecting how much attention is paid to the higher-priced automotive segment by manufacturers.
In countries like Norway, for example, the change is significant with prices skyrocketing from €42,199 ($42,838) to €68,677 ($69,707). This is 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) at the end of June 2022.
In contrast, the Chinese market has seen only a modest 5 percent increase in recent years, mainly as supply has expanded to lower segments. Smaller microcars and SUVs contributed to modest price increases between 2015 and 2022.
Electric Vehicles Are Not Yet An Alternative
While buying petrol-powered cars is now much more challenging for most of the population, their electric counterparts are not in a better position. With the exception of Norway and in some cases China, the rest of the world still can’t afford most of the battery-powered models available today. If it weren’t for the incentives offered by some governments, the situation would be very different with the growing demand for these cars.
In general, motorists will have to pay up to €55,821 ($56,666) for a new electric car in Europe. Even more so in the US at $63,864 in the US, where China is $31,829 cheaper in China. Barring a huge 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, with a focus on the high-end segment. Most of the offerings found in this market are actually luxury sedans and SUVs, although this trend is starting to change with the introduction of cheaper cars, such as small SUVs, city cars, and utility cars.
As a result, industry and consumers face a huge challenge to ban polluting cars and promote clean cars, while at the same time providing real cost-effective solutions for the masses. China did it. The West should pay attention.
The author of the article, Felipe Munoz, is JATO dynamics Automotive Industry Specialist.
