Compared to our purchasing power in the past, current car prices can be described as high. And we’ve also seen that these prices seem to be increasing at a fast pace. Now, we must address the question of why all this is happening by answering several questions.
Are the manufacturers lining up?
No. That cars expensive because manufacturers have increased their profit margin is a very reasonable assumption. However, it does not seem correct. Brands publish detailed sales and profit data and, therefore, we can know that their profit margin ranges from the 7.5% of those groups that do things very well (such as Toyota or BMW) to the 3-4% that groups such as Daimler, Ford, SAIC or General Motors have been harvesting. And these are figures that do not usually experience dramatic variations.
Do you pay more taxes?
Yes. VAT has not changed. And formally, neither has the registration tax. However, since January of this year, the CO2 emissions figure calculated strictly applying the WLTP standard has been used for its determination, and this has caused many cars to ‘jump’ from the tax bracket, for example, by paying 0 % to pay 4.75%.
It is estimated that the change is affecting up to 40% of the units sold, and that the average impact represents a premium of about 1,000 euros per car, equivalent to a 3.3% increase in a 30,000-euro vehicle. In the medium term, the logical reaction of manufacturers will be to further reduce their emissions, opting for more efficient propulsion systems… and probably more expensive.
Is the anti-pollution standard tougher?
Yes. Since 2020, the European Union has begun to impose fines on those groups of manufacturers that fail to keep the average CO2 emissions of their sold models below 95 g/km. 95 euros are paid for each gram exceeded, so that a Renault Megane, which approves emissions of 125 g/km, should pay a fine of 2,850 euros, equivalent to more than 10% of the price of the car.
Manufacturers can offset these emissions by selling plug-in hybrid and electric units, but they are more expensive than ‘conventional’ cars and also contribute to price increases (although less than fines).
Do the cars offer better quality?
Yes. Quality is not a subjective concept, but it does need to be defined before being evaluated. Although at Autofacil we have the impression that, in the last five years, the quality of all cars has increased spectacularly, it is something on which anyone could disagree… except in some cases, such as Dacia, a brand whose new products have undergone a dramatic improvement.
Have cars grown?
Yes. Cars are getting bigger and heavier. This is an effect derived, especially, from the popularity of SUVs, but also from improvements in safety. According to the ICCT (International Council for Clean Transportation), between 2016 and 2020, the average weight of cars sold in Europe increased by 85 kilos. And logically, this increase in materials and systems has to translate into an increase in weight.
Is the approval standard tougher?
Yes. The European Union has decided that, from June of this year, certain active safety systems (such as emergency lane maintenance) will be mandatory. For its part, EuroNCAP has also tightened its tests, demanding the availability of new passive (such as the front center airbag) and active (such as autonomous emergency braking) safety systems in order to qualify for the highest qualifications (in practice, it is like if these systems were to become mandatory). The minimum manufacturing cost of each of these systems is around 300 euros.
Definitely…
Although cars are becoming more expensive, that does not mean that they offer worse value for money, because they are also better and, in that sense, the price premium they are experiencing is fair… and justified.
The problem is that all these improvements in the quality, comfort, safety, efficiency and emissions of new cars are completely useless for an ever-widening sector of the population, who cannot or does not want to pay what they are worth. these ‘improved’ cars and, on top of that, they are also beginning to be excluded from the V.O. market. due to the collateral price increase that used cars are experiencing; an increase that, in this case, is not accompanied by any substantial improvement.
These are the prices of new cars today
We have carried out a statistical analysis of the prices collected in the JATO Dynamics new car database to get a better idea of how much cars currently cost.
The first thing to note is that this analysis refers to the current offer of models. This means that we are not weighing the number of units sold of each model and version, but only analyzing the existing supply. For this reason, the conclusions will be similar to those that we would obtain if we carried out a detailed analysis of our price guide (something that, on the other hand, is similar to the personal process that leads us to exclaim “but how expensive are the cars”).
We have started by eliminating those versions with a cost greater than 80,000 euros. This is an arbitrary cut: we have simply considered that those who are considering buying a car of more than 80,000 euros are probably not very concerned about the rise in prices… and, therefore, these are prices that are not relevant to this studio.
Analyzing the prices of the remaining models and versions (those that cost less than 80,000 euros, which are around 4,000), we discover that the average price of the car for sale today is around 41,000 euros. Taking into account that the best-selling segment is that of SUVs, we would be talking about something similar to a Volkswagen Tiguan 2.0 TDI DSG with 150 hp.
However, and as we have explained before, when it comes to talking about salaries, the average is a misleading statistical magnitude. The mode, on the other hand, is a much more representative parameter, and would correspond to the most frequent price in the JATO database, which is around 28,500 euros. Examples of this class of cars would be a Kia Ceed 1.6 MHEV with 136 CV, a Toyota Corolla 125H or a Volkswagen Golf 1.0 eTSI DSG with 110 CV. It is, by the way, cars very similar to the Renault Megane that we have chosen before to analyze the evolution of prices in the last 20 years.