What has really driven the rise of vehicle prices between 2020 and 2024?

Since 2020, the European automotive industry has been experiencing a systemic, multi-faceted crisis, the most significant and impactful of which is a structural decline in sales volumes compared to the pre-Covid period. In France, for instance, the number of new vehicles sold fell from 2.21 million in 2019 to 1.72 million in 2024, a decrease of 22% (source: CCFA). A similar trend has been observed in many other European countries.
There is a broad consensus that this decline in sales is due to the rise in price of new passenger vehicles, which are now widely regarded as unaffordable for many households. The price/volume elasticity effect, which is well known and especially pronounced in the automotive sector, is at play here. Between 2020 and 2024, the list prices of new vehicles purchased in France rose significantly—by €6,800 including VAT, equivalent to a 24% increase—with an unprecedented impact on fleet renewal.
Some manufacturers blame European regulations for this increase, while other actors point to opportunistic model lineup strategy and pricing policies used by manufacturers to maximize profits at the expense of volumes.
However, there is general recognition of the long-term detrimental effect of this trend, affecting both:

(1) automotive equipment manufacturers and their European production sites, where the decline in sales and production is exacerbating their structural overcapacity—a situation already driven by years of intense competition from carmakers sourcing components in low-cost countries;

(2) middle-income consumers, whose financial capacity to purchase new vehicles has been severely undermined. They are also now experiencing the delayed impact of four years of rising new car prices on the second-hand market. This has slowed down the renewal on the second-hand market, leading to an ageing stock, an increasing lock-in effect, and a structural decline in sales.

In this note, we examine the specific mechanisms through which new vehicle prices have risen over the past four years, allowing us to identify the underlying causes, whether:

1. Exogenous to the strategic choices of car manufacturers (imposed); Inflation in the price of raw materials and energy; Costs linked to regulatory enhancements required to meet European pollution and safety standards.
2. Endogenous, aimed at improving margins for manufacturers (chosen); Moving upmarket through segmentation (reducing the model range and sales of smaller low-end cars, while increasing those of SUVs, higher-end vehicles, or better-equipped versions of existing models); Increasing prices within segments to boost model profitability (pricing power).
3. Or combined, depending on each brand’s compliance strategy (chosen/imposed); The electrification strategy adopted by manufacturers (the share of electric or hybrid vehicles) to meet their CO2 individual regulatory targets set out according to European climate commitments.

To this end, the Institute for Mobility in Transition (IMT-IDDRI), with technical support from the strategic foresight consultancy C-Ways, conducted a detailed study of the evolution of sales-weighted list prices for all passenger vehicles sold in France between 2020 and 2024. Comparative analysis by segment, brand and energy type reveals both general and manufacturer-specific trends, as well as the mechanisms behind them.
This analysis is essential for addressing two key questions that will shape future fiscal and industrial policies to restructure and support the automotive sector:

• What policy measures could stimulate demand (purchase incentives, social leasing, taxation, green quotas for private or public fleets) to develop an offer of new and used vehicles that better matches the budgets of middle-income households?
• What are the risks of increased production costs associated with local content requirements (such as “made in EU” policies) for vehicles sold in Europe, and what leeway exists to offset these effects?