5 January 2025

Increasing new car prices for European fleets

In a rapidly evolving automotive landscape, European carmakers are facing a tough challenge: escalating prices that could threaten their future.

A new report by Jato Dynamics, titled Rising Car Prices and Their Impact on Europe’s Automotive Industry, paints a concerning picture. Car registrations in Europe have dropped sharply, with 2024 seeing a gap of over 2.5 million fewer cars sold compared to pre-pandemic levels.

Why is this happening? The answer lies not just in the usual ups and downs of the market, but in a deeper issue that’s putting European manufacturers in a bind. Felipe Munoz, global analyst at Jato Dynamics, points out that while Europe’s car market is mature, the combination of high prices and weak sales isn't just a response to past crises – it's a sign of systemic trouble.

Regulation and Rising Prices:

One of the driving forces behind this price surge is regulation. By 2035, all new cars in Europe must be zero-emission. This ambitious shift is putting pressure on manufacturers to develop battery electric vehicles (BEVs) quickly. While this is good for the environment, it’s bad for wallets – BEVs typically come with a higher price tag.

But the competition isn’t just local. China, having mastered the art of affordable electric cars, is flooding the European market with budget-friendly alternatives. This has made it even harder for European manufacturers to keep up with rising costs. In Germany, the average price of a new car is now a staggering €56,735. France, Spain, and Italy aren't far behind, with prices approaching €50,000, while the average price of a new car in the UK is £40,000—higher than the average UK salary.

ICE Vehicles:

It’s not just the BEVs driving up prices. Internal combustion engine (ICE) vehicles are a significant part of the problem. In countries like Germany and the UK, ICE prices have increased dramatically, far outpacing those of electric cars. In fact, prices for ICE vehicles have surged by over 25% in some markets, while BEV prices have remained relatively stable or even decreased in a few places.

This disconnect has led to a tough reality: while policymakers push for a greener future, the automotive industry is caught between a rock and a hard place. With just 15% of new cars in Europe being BEVs, it’s clear that a huge gap exists between regulatory goals and the market’s ability to deliver.

A Future of Innovation and Survival

As prices continue to climb, the future of European carmakers hangs in the balance. The industry has lost 3.3 million car sales since 2019, and with China now a dominant force, European manufacturers must find new ways to reduce costs. It’s not just about making greener cars – it’s also about making cars people can afford.

Activa is prepared to stay ahead of the curve, delivering solutions for those seeking any make or model of new car or van. With options like contract hire and salary sacrifice, we make high-quality cars more accessible while remaining committed to a greener, more affordable future.