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Home News International EV News

Electrification Drives Up Car Prices, Sparking Affordability Crisis in Auto Industry

Aditi Singh by Aditi Singh
May 30, 2025
in International EV News, News
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A recent study by JATO Dynamics and Oliver Wyman highlights a significant affordability crisis in the automotive industry, attributing a 40% surge in vehicle prices between 2019 and 2024 to the ongoing shift towards electrification. This price increase has coincided with a 22% decline in sales volumes, indicating a growing disconnect between vehicle pricing and consumer purchasing power.

The study, titled “The Automotive Pricing Study,” reveals that while Battery Electric Vehicles (BEVs) are central to the industry’s evolution, they account for only one-third of the observed price hikes. The remaining increases are attributed to inflation, economic pressures, and the rising costs associated with other electrified powertrains, such as Mild Hybrid Electric Vehicles (MHEVs) and Plug-in Hybrid Electric Vehicles (PHEVs).

Affordability challenges are most acute in the sub-€30,000 price segment, where sales have experienced the steepest declines. Despite a 24% rise in net salaries in Germany during the study period, overall car affordability has dropped by 11%, primarily due to a lack of budget-friendly options. Consumers are increasingly turning to used cars, leasing, and long-term financing as coping mechanisms for rising costs.

The report warns that the affordability crisis poses long-term risks for Original Equipment Manufacturers (OEMs). As consumers find new vehicles financially out of reach, OEMs may face declining sales and market share, especially if they fail to offer competitively priced electrified models. This situation could lead to increased financial strain and necessitate strategic adjustments in production and pricing strategies.

Industry analysts suggest that to mitigate these risks, OEMs must focus on developing cost-effective electrified vehicles and explore innovative business models, such as subscription services or flexible financing options. Additionally, collaboration with policymakers to provide incentives and subsidies could help bridge the affordability gap and promote wider adoption of electric vehicles.

The study underscores the importance of balancing technological advancement with economic accessibility. As the automotive industry continues its transition towards electrification, ensuring that vehicles remain affordable for a broad consumer base will be crucial for sustainable growth and environmental impact.

In conclusion, the findings highlight a pressing need for OEMs to reassess their strategies in the face of rising vehicle prices and declining affordability. Addressing these challenges proactively will be essential to maintain consumer interest and achieve long-term success in the evolving automotive landscape.

Tags: Car cost crisisCheap EVsElectric car priceEV impactMaker price issuesPrice rise
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