This dual movement of rising prices and falling volumes reflects a well-documented price elasticity mechanism in the automotive sector. Understanding why car prices have risen so much requires untangling several mutually reinforcing factors.
Environmental Standards and Technological Cost Overruns of Vehicles
Manufacturers regularly cite the weight of European regulations to justify price increases. The integration of hybrid or electric drivetrains, mandatory driver assistance systems, and constraints on CO2 emissions increase development and production costs.
Dacia, for example, has publicly advocated for a freeze on standards to bring car prices down. The argument has some truth: each regulatory layer adds components (more efficient batteries, sensors, onboard software) that are reflected in the final bill. When consulting the prices on Racing Car Yonnais, one can concretely measure the gap between entry-level models and versions compliant with the latest standards.
However, a report from the Institute for Transition Mobility (Iddri) strongly nuances this discourse. According to this study, regulations explain only a fraction of the observed increase. The rest is due to the industrial and commercial choices of the manufacturers themselves.
Automakers’ Margin Strategy
This is the central point of the Iddri report and the work relayed by Le Monde: manufacturers have deliberately shifted their offerings towards the high end to increase their unit margins. Rather than compensating for rising costs through volume, most European brands have chosen to sell fewer cars, but at higher prices.
This so-called “pricing power” policy has resulted in a decline of city cars and entry-level models in catalogs. The ranges have been enriched with equipment that was once optional, now standard, which mechanically inflates the displayed price. The consumer looking for a simple and affordable vehicle finds themselves facing a reduced offer.
This phenomenon is not unique to France. In several European countries, the contraction in sales has reached comparable proportions, indicating that the strategy is shared across the entire continental industry.
Total Cost of Ownership: A Blind Spot in the Car Price Debate
The list price tells only part of the story. According to the ICCT (International Council on Clean Transportation), by 2025, an electric car will cost on average 33% less to operate than a gasoline vehicle in Germany, including energy and maintenance. The vehicle remains expensive at the dealership, but the overall bill over several years can turn around.
Insurance, depreciation, parking, and financing often weigh more heavily than fuel or charging in a household’s monthly automotive budget. This reality complicates the raw comparison between gasoline and electric vehicles based solely on the purchase price.
The Real Price of Electric Cars is Falling
In Germany, between 2020 and 2025, the real price of electric cars has decreased by about 18% after adjusting for inflation and performance improvements, according to the ICCT. During the same period, the real price of gasoline vehicles has increased by 2%. The idea that electric vehicles uniformly drive prices up does not hold against this data.
The offer is also expanding: in Germany, the number of available electric models has quadrupled between 2020 and 2025, reaching about 160 models. Among them, around 35 are sold for under 30,000 euros. The arrival of Chinese manufacturers in the European market accelerates this trend, with volumes rising sharply.
Chinese Competition and Price Pressure in Europe
Chinese brands like Leapmotor or Chery are showing spectacular sales growth in the European market. Their models, often electric and priced below those of historical manufacturers, exert unprecedented pressure on the affordable vehicle segment.
This offensive is provoking an initial reaction. Some European manufacturers are reintroducing budget-friendly models or adjusting their pricing structures. The “price war” mentioned in several market analyses could, in the long term, correct part of the drift observed since 2020.
The available data does not yet allow for a conclusion on whether this movement will be sufficient to bring prices back to levels accessible for the majority of French households. Field reports vary on this point: some dealers are noticing a renewed interest in new entry-level models, while others observe a massive shift towards used cars.
Used Car Market and Price Contagion Effect
The rise in new car prices has mechanically driven up used car prices. Buyers shut out of the new car market are turning to the secondary market, where increased demand pushes prices up. This phenomenon, amplified by the shortage of recent vehicles due to post-Covid production delays, creates a cycle fueled by several factors:
- The scarcity of recent models in the used car market, a direct consequence of the decline in new registrations since 2020
- The aging of the French vehicle fleet, which pushes households to keep their current vehicle longer rather than sell it
- The rising maintenance costs of older vehicles, which reduces the perceived financial advantage of used cars compared to new ones
The renewal of the French car fleet is experiencing an unprecedented slowdown. Low-income households, which make up the bulk of the used car market, are feeling the brunt of this inflation. The automotive budget is becoming an increasingly constrained expense, with alternative mobility solutions not yet sufficiently deployed to offer a credible escape in all areas.
The trajectory of car prices in France will depend on the ability of European manufacturers to offer affordable models in the face of Asian competition, and on the evolution of the regulatory framework. The balance of power between volumes and margins remains the determining factor for the coming years.
