Rapid Inflation of New Car Prices Exceeding Rise of Wages, According to Research Findings - Car cost escalations outpacing income growth, according to recent research
Article:
New research indicates a steep rise in new car prices in Germany, outpacing income growth significantly since 2019. The study, conducted by Oliver Wyman and market researchers from Jato Dynamics, reveals an increasing affordability gap between net salaries and new car prices.
Over the five-year span, average annual net incomes in Germany have grown by 24 percent, from approximately €26,100 to nearly €32,400. Conversely, the average price of a new car surged by more than 38 percent, from around €30,200 to nearly €41,800. This trend has led to a 11 percent decrease in car affordability, as the average person now pays an average of 1.29 annual incomes for a new car, up from 1.16 in 2019.
The study attributes over 40 percent of the price increase to the shift towards electric powertrains, encompassing pure electric and hybrid vehicles. Inflation and other economic factors also contribute to the escalating costs. Reduced availability of entry-level models is pushing more consumers towards financing, leasing offers, and used cars. According to the analysis, new car purchases in Germany declined by 22 percent during this period.
While the shift towards electric vehicles may be a barrier for some, research from the Fraunhofer Institute for Systems and Innovation Research (ISI) suggests that electric car owners could save money in the long run. Mid-range electric vehicles often prove more cost-effective after three years of typical use and with their own charging capability. This is due to cheaper energy costs and lower maintenance expenses.
The findings underscore the challenges in new car affordability facing Germany as prices rise and entry-level options decline. However, potential solutions like social leasing schemes and the introduction of more affordable electric models could offer relief. The demand for electric vehicles is surging, with BEV registrations increasing significantly in recent months, evidencing a strong market for electric vehicles but also posing challenges for affordability.
- The steep rise in new car prices, influenced by a shift towards electric powertrains and other economic factors, is currently outpacing income growth in Germany, leading to a significant affordability gap in the employment policy within the automotive industry.
- The research further reveals that, over the past five years, the average price of a new car has surged by over 38 percent, while average annual net incomes have grown by only 24 percent, leading to a 11 percent decrease in car affordability.
- The study suggests that the reduced availability of entry-level models is pushing consumers towards financing, leasing offers, and used cars in the transportation sector, contributing to the decline in new car purchases by 22 percent.
- Despite the challenges in new car affordability, research from the Fraunhofer Institute for Systems and Innovation Research (ISI) indicates that electric car owners could save money in the long run due to cheaper energy costs and lower maintenance expenses, offering a prospective solution in the employment policy relating to electric-vehicles in the technology industry.
