Will the price of cars continue to rise? Manufacturers and dealers respond

Buying a new car below the psychological barrier of 10,000 euros is no longer possible in Spain.

Oliver Thansan
Oliver Thansan
20 March 2023 Monday 00:25
81 Reads
Will the price of cars continue to rise? Manufacturers and dealers respond

Buying a new car below the psychological barrier of 10,000 euros is no longer possible in Spain. The upward trend in prices, which we all experience on a daily basis with the shopping cart, also has its impact on the automotive industry. A study by the Organization of Consumers and Users (OCU) reveals that the price of combustion cars has increased by 40% between 2018 and 2023, a percentage well above the CPI for that period, which is 15.3%. .

The aforementioned report focuses on the rise in prices of combustion cars, since the greatest increases are seen in the copies that equip traditional engines. On the other hand, in hybrid engines these increases have been more contained. And in the case of electric cars, there has been a price drop, specifically 6%, taking as a reference the cheapest model in 2018 (Peugeot Ion, 21,850 euros) and in 2023 (Dacia Spring, 20,555 euros).

In 2022, 813,396 new cars were sold in Spain, 5.3% less than the previous year, a figure that is below the forecasts that were around 830,000 vehicles delivered. However, 2023 has started on the right foot. Both in January and February, sales experienced a significant upturn compared to the same months of 2022. In the first two months of the year, almost a third more vehicles have been sold than in the same period last year.

But how will the market behave throughout the year? Will the price of new cars continue to rise? Will combustion cars be more economical? To find out, we have contacted the employers' association of the Anfac car manufacturers and the employers' association of the Faconauto dealerships so that they can provide us with their point of view on the market forecasts.

The prospects are not good for consumers, agree the sources consulted. The general context, with an "inflationary spiral that the automobile sector does not escape", with increases in the price of energy, gas and electricity, makes "producing more expensive", they say from Anfac. Last year, manufacturing a vehicle in Spain was 6% more expensive than in 2021. The increase in the cost of raw materials, such as steel, glass or rubber, causes component manufacturers to also be forced to raise prices, points out a spokesperson for the manufacturers' association to explain the increase in production costs.

“We have just learned the inflation data for February and it is already at 6% while food is up 16%. The price problem is general, not the automobile”, they indicate from Anfac anticipating what can happen throughout the year.

From Faconauto they consider that the increase in the price of new cars is related to the "technological effort" that manufacturers are making to accelerate the decarbonization demanded by Brussels, as well as the lack of stock due to the semiconductor crisis and the increase in the cost of raw materials. In this context, they believe that users are the biggest losers, especially those with lower incomes. "The increase in the price of the vehicle will polarize the automotive market, with a minority that can access new technologies and a majority that, for rent, has to settle for continuing to drive old and polluting vehicles, which currently have a average age of more than 13.5 years”.

Faconauto points out that the average income of Spanish citizens, which is 23,000 euros per year, represents an obstacle for families to access the electric car, the only one that has experienced a price drop in the last five years. “So that there is no two-speed mobility in Spain, we consider it essential that families be helped in this transition through urgent measures. Specifically, a Moves Plan should be considered that is perceived as a direct aid to the acquisition of the electric vehicle, with the reduction of the payment term to the buyer”.

From the employers of the concessionaires they also underline the need to "bet on a decarbonization plan based on technological neutrality and also facilitate the bureaucratic mess that involves installing a recharging point." For this reason, Faconauto points out that "the purchase of low-emission combustion cars should be encouraged, and not just electric ones" taking into account the purchasing power of Spaniards.

The OCU study highlights the strong price increase since 2018 led by models with traditional engines, which in the opinion of the sources consulted by Moveo responds to the high demand that gasoline and diesel cars still have. “It is the law of supply and demand. Today the most demanded cars are those with fuel. Only 4.5% of sales in Spain in 2023 are electric passenger cars. This means that the rest have a combustion engine”, replies Anfac.

For Faconauto, this increase in the price of combustion engine vehicles is "a reflection that the user continues to demand this type of technology compared to electric ones." The dealers believe that "the artificial acceleration of the decarbonization process promoted by the European Union" clashes with the price of electric vehicles that "are still inaccessible to the so-called middle class."

However, Anfac disagrees with the OCU considering that the comparison it makes with the price of the cheapest models in 2018 and 2023 is not the most correct. “A car from a brand that is no longer offered in the Spanish market in the diesel variant, such as the Dacia Sandero, is being compared with a new generation car that is the Citroën C3. It is not true that the prices of diesel models have skyrocketed. In some cases, even after having lowered their sales, there are more attractive offers than in gasoline models”.

The employers' association of automobile manufacturers also emphasizes the fact that the OCU study does not take into account that new generation cars include driving assistance systems (ADAS). "Therefore, this causes the final price of the model to rise."

With regard to electric cars, in principle a price increase is not expected due to the low demand for models of this technology. However, if the price of energy and raw materials continues its upward trend, it is likely that this increase will end up having an impact on the cost of cars. “The price of electric cars cannot rise any further, since the Spanish consumer, with an annual income of 23,000 euros, does not have the same facility to switch to an electric car as a country like Germany with an average income of 46,000 euros. Politicians have to step off the accelerator when it comes to the deadlines imposed by Brussels because they are putting the Spanish and European industry in a very difficult situation”, they answer from Faconauto.

Manufacturers are also aiming along the same lines as dealers, although they maintain their reserves due to the geopolitical situation that still affects the price of raw materials and the cost of energy. “In principle, electric vehicles should go down in price as they have more presence in the market. However, with the current economic crisis and the war in Ukraine, the opposite circumstance has occurred: the price of batteries that had been falling for decades has risen. The reason is the increase in the price of raw materials (lithium, cobalt, nickel, …) in addition to the increase in energy costs”.