When the car goes back to being a luxury product.

It’s one thing to say that car prices have gone up a lot; know how much is another. During an inquiry, the company AAADATA gave me the number: between the first half of 2019 and this year, that is, between before and after Covid, the average sale price of a new car went from €26,775 to €32,446 .

I had already dealt with car price inflation here, but there, there is a lack of control: a little more than 20% inflation in three years. In 2010, this average price was just under €20,000…
Even the Dacia Sandero was expensive: in three years it went from €8,500 to €11,000 in its basic version.

What is new is that, unlike enrichment, this inflation goes down:
At first, the slump in new cars dried up the market for recent first-hand ones, then, combined with longer lead times, caused their prices to skyrocket. Then the rise gradually trickled down to the bottom of the market. Old things that weren’t worth 1,000 euros before Covid are trading at 3,000 euros and a friend confided in me that he had taken 5,000 euros from his mother’s dented Toyota (21 years and 120,000 km) that he was unable to get rid of half to least two years ago.

The demolition cap

Another anomaly, in August, more cars over 15 years old were sold than new: 96,000 against 91,500.

Clearly, cars that were previously scrapped as part of the conversion premium now find buyers because today they are often worth more than the €1,500 or €3,000 cap.

Second-hand buyers laugh less. On a well-known classifieds site, it is difficult to find a decent compact family car for 10-12 years around 100,000 km below €7,000. The only real choice is between €7,000 and €10,000.

Equally confusing, three-year-old cars are showing up at their new 2019 price tag.

When the car goes back to being a luxury product.

The power to set prices…

I know, this all stems from the Covid pandemic and after the war in Ukraine, component shortages and rising energy prices.

But as far as I know, TSMC’s Taiwanese microprocessor factories, like Samsung’s in Korea, are running at full speed again.

What remains current is an anglicism that manufacturers discovered during scarcity: the power of pricing, the power to set prices, a fabulous thing, the merchant’s Grail that allows two curves to cross: falling sales and profit growth. Clearly, how to earn more by selling less.

By the end of the price war, the discounts, promotions and rebates, the RV (demo vehicles) that ended up in “used 0 km”, the sales to rental companies and agents, the torrents of advertising and all these commercial contortions that nibbled the margin .

When the car goes back to being a luxury product.

“Price power”, as you say in Chinese?

I’m not saying there’s an agreement among manufacturers to keep prices high, but rather an implicit consensus to no longer aim for high volumes that require “pushing the plate” at all costs into showrooms.

How else could they? Electrical transition materials, lithium and rare metals do not flow freely like 20th century automobiles, steel, aluminum and plastic.

That’s why I hardly believe the much-heard predictions of a return to normal prices by the end of 2023. And also for two additional reasons.

On the other hand, in order to be able to sell electric cars at their true price, it is important not to offer very cheap thermal plants…

Even less so when the state favors the latter by cutting fuel prices while electricity prices threaten to explode.

On the second-hand side, there is no further improvement in sight, because the drop in new cars over the last three years will have lasting effects: the hundreds of thousands of cars that haven’t been made for nearly three years will be missing from the market for a long time.

In short, the car is becoming a luxury product and we still haven’t measured all the social, political, demographic and geographic consequences…

But already an economic downturn: in 2022, sales in France of the Chinese manufacturer MG increased by 98% and European imports of cars (LCVs, buses, trucks) from China increased by 150%, reaching 500,000 units, and their value was multiplied by three.

How is pricing power said in Mandarin?

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