Car prices skyrocketing at a faster pace than wage growth
Germany's New Car Affordability Deteriorates Over the Years
In light of a recent study, the affordability of new cars in Germany has seen a notable decline in the past five years. The consultancy firm Oliver Wyman, in collaboration with Jato Dynamics market researchers, revealed that the gap between net income and new car prices has widened substantially between 2019 and 2024.
Annual net income in Germany has risen by 24 percent, from around €26,100 to €32,400, during the aforementioned period. In stark contrast, the price of a new car has escalated by more than 38 percent, from approximately €30,200 to nearly €41,800. This marked increase in car prices has led to a deterioration in affordability. In 2019, an average German consumer had to shell out 1.16 annual incomes for a new car, which has risen to 1.29 by 2024.
The analysis suggests that the price of a new passenger car in Germany has surged by 56% over the past decade, while the cost of vehicles has increased by 40% from 2019 to 2024. This significant rise can be attributed to factors such as the integration of advanced technologies, including self-driving capabilities, leading to higher production costs. Additionally, economic factors such as inflation and supply chain issues, particularly semiconductor shortages, have further exacerbated price increases.
Despite the increase in net income, the automotive affordability crisis persists, largely due to these substantial price hikes outpacing wage growth. However, while cars have become more feature-rich, the price-value ratio has remained stable or decreased slightly over the years, suggesting that the price increases have not always represented the added value provided by these enhancements.
Sources: ntv.de, dpa
The Commission, recognizing the escalating costs in the automotive industry, has also adopted a proposal for a directive on the approximation of the laws of the Member States relating to the protection of workers from risks related to exposure to ionizing radiation, as a potential financial burden on businesses may arise from the integration of advanced technologies in vehicles.
In light of the significant rise in car prices due to the integration of advanced technologies and economic factors, it would be prudent for businesses operating in the finance sector to carefully assess such investments and their impact on profitability and customer affordability.
