Why the car will again become a luxury, not a means of transportation?

Why the car will again become a luxury, not a means of transportation?

Since the beginning of 2022, new cars have risen in price by an average of 3%. Prices have been rising throughout the past year and are expected to continue to rise. Meanwhile, the decline in production and increased demand for new machines led to their shortage. Getrentacar.com found out from analysts and a car dealer what the market expects in 2022 and why expanding the production of electric cars can only aggravate the situation.

Since January 1, the cost of Mitsubishi and Renault cars has increased by 1.5-2%. Mercedes cars went up in price by about 1.5%, Kia ― by 2-4%, Toyota and Lexus ― by 2-3%.

Demand for cars during the January weekend did not decrease. However, it is now difficult to buy a car of the last model year: the warehouses are almost empty. Heads of dealer holdings note, it is now easiest to find cars of expensive configurations or those that are usually used as taxis on sale.

The reason for the shortage of cars is the lack of electronic components, which almost all major manufacturers faced during the pandemic. The increase in the price of raw materials and logistics services in the world, as well as the exchange rate volatility, also affected, experts said. They recall that in 2021, the cost of cars increased by 5-25%, depending on the brand and model. In the coming year, the trend will continue, prices in the industry will continue to grow. According to forecasts, in the first half of the year, cars will rise in price by an average of 3-5%, experts noted. Statistics confirmed that car prices will continue to rise. In addition to inflation, the rise in car prices, according to experts, contributes to the shortage of microchips. As a result, fewer cars are produced. The agency adds that between January and November 2021, the average cost of a new passenger car increased by 23%. In 2022, as experts expect, price growth will also be double-digit and exceed 10%. At the same time, the demand for cars will continue, despite the fact that "prices have become detached from reality." Earlier, high authorities reported that in 2021, prices for domestically produced cars increased by an average of 5-8%, and for foreign cars by 20%. The department expects that price growth will slow down in the coming year. However, the shortage of cars will continue at least until mid-2022.

Will the increase in the production of electric vehicles affect the car market?

From January to November 2021, were sold more than 1.4 million cars and small trucks. This is almost 7% more than in the same period of 2020, according to the data of the Association of European Businesses (AEB). However, in November 2021, car sales fell by 20.4% compared to November of the year before and amounted to just over 125,000 units. The AEB predicts that sales will continue to decline, and the numbers will worsen. According to experts, in addition to such factors as production cuts, shortages of semiconductors, and logistical problems, government actions will negatively affect the market. Recall that in August 2021, high authorities approved the concept for the development of electric transport until 2030. By 2030, the share of electric vehicles should grow to 10% of the total production of vehicles. This will create about 39,000 new jobs in only one country.

However, in October, the countries of the Eurasian Economic Union failed to agree on an extension of the zero rates of import customs duty for electric vehicles. According to the draft amendments published in November, the recycling fee for imported new electric vehicles should increase by almost nine times, and for used ones older than three years b,y four times. The increase in scrappage fees, according to the AEB, will contribute to an increase in prices for electric vehicles for the end consumer, and will negatively affect sales and the development of charging infrastructure. The experts believe that an increase in the production of electric vehicles to the detriment of cars with an internal combustion engine will contribute to an increase in prices for components.

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