Why are cars more and more expensive?

How high will car prices go? After gasoline, repairs, insurance (+16% since 2010) it is now the purchase price of vehicles that is soaring. Observed since the end of last year, the phenomenon is worsening due to the conflict in Ukraine.

An increasingly expensive car fleet to produce

Last December, theArgus reported an increase in the price of new vehicles, with a average cost of 26,800 euros across all categoriesan increase of 35% over ten years. This is 25 times more than the increase in French incomes over the same period. Consequently, the median age of the purchaser of a new car is falling further and further: it is now around 60 years old.

A series of structural and more cyclical causes have contributed to this outbreak. First, in terms of trends, it should be noted that the French car fleet, better and better equipped, has been becoming more expensive for several years already.

The arrival on the market of electric and hybrid vehicles (about 10% of registrations last year) contributes to this increase in the average price, because, equipped with advanced technologies, they are more expensive to produce.

In addition, regardless of the engines, many safety equipment have become mandatory or essential in recent years: ABS, ESP, seat belt warning light, airbags, cruise control (compulsory in France from July 2022)… think also of the mandatory anti-pollution systems, which further increase the bill.

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Covid-19 and component shortages

Car prices will therefore increase from year to year, but, in this regard, the Covid-19 has not helped. The auto industry has indeed suffered since the start of the ebb of the pandemic from a shortage of semiconductors, essential to these new vehicles full of electronics.

Based in Asia, the producers of these circuits have redirected their production towards products in high demand during successive confinements (household appliances, game consoles, etc.). Result for the French manufacturer Renault: a production cut by 500,000 vehicles last year.

What is rare being expensive, we understand better that such a limited production affects the prices in concession. But closer to us in time, the consequences of the Russian invasion of Ukraine have further aggravated this phenomenon.

A phenomenon aggravated by the conflict in Ukraine

Since the end of February, world markets have been disturbed by this major conflict and by the sanctions imposed by Western countries. L’steel and the plastic in particular have been added to the list of raw materials in tension. We also think of copperused for cables, or at nickel, essential for batteries, both of which are usually imported from Russia.

Among manufacturers, it is the coup de grace for production lines that have already been idling for more than two years. Thus, since last October, the price of a Peugeot 3008 has increased by 250 euros. This is 800 euros more for the Dacia Sanderoand even +1,750 euros for a BMW 1 Seriesaccording to the findings of France info.

Moreover, inflation is no longer affecting only new vehicles. Second-hand cars, widely acclaimed for two years: nearly 6 million used vehicles were sold last year (+8% compared to 2020), it is three times more than the number of new registrations (1.7 million).

As a result, opportunities are also starting to run out, and bargains are becoming increasingly rare. There too, the future is worrying, because the continued decline in sales of new vehicles means that tomorrow there will be supply on the second-hand market… The spiral of high prices is therefore not about to stop. .

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