Price explosion for new cars – that’s why they are getting more and more expensive

The prices of new cars have risen dramatically in recent years. Micro and small cars in particular have become significantly more expensive – in Germany between 2017 and 2023 by 55 and 35 percent respectively. This shows an analysis of the ADAC. The situation is similar in Switzerland and Austria. But what is behind this price development?

Increasing safety standards

An eternal price driver is the increased safety requirements in the automotive sector. ESP, airbags and many assistance systems including their sensors and powerful chips are now standard equipment. This increases security. But also the prices.

disruptions caused by crises

The consequences of the corona pandemic and geopolitical events such as the war in Ukraine have affected the global supply chain and global trade. The lack of microchips, which are increasingly installed in modern vehicles, has hit the automotive industry particularly hard. This led to production bottlenecks and longer delivery times, which in turn drove up prices – especially as some manufacturers began to prefer building high-priced, higher-margin models.

Environmental and climate protection

Manufacturers have been under pressure for decades to reduce exhaust emissions from their cars. For example, through the use of catalytic converters: since the 1980s, their use has improved exhaust emissions. However, there are precious metals in catalytic converters. And these, in turn, have significantly increased the cost of production of modern cars. Manufacturers are also well paid for modern solutions such as automatic engine shutdown at traffic lights or economical hybrid technologies.

Electromobility: cost-intensive technological changes

The development and introduction of electric vehicles entails considerable costs. New manufacturers also have to set up car factories and some battery factories, while incumbent manufacturers have to convert old factories. The car manufacturers recover the costs through higher prices on the customers.

Discontinuation of entry-level and basic versions

Perhaps the most important driver of this development is the model policy of the manufacturer. Cheap basic versions with low engine power are disappearing from the range, leading to a shortage of supply. For example, two-door models in the small and compact car segment are becoming increasingly rare. In addition, entry-level models are increasingly equipped with extras such as air conditioning or infotainment systems, driving up prices. And with it the billions in profits for the manufacturers.

(t online)