New car sales in 2022 are the lowest in nearly 50 years and the big loser isn’t who you think
Cars at a Renault-Dacia dealership in Vitry-Sur-Seine.
©AFP / ERIC PIERMONT
The decline in new car sales continued in 2022 with 1.53 million vehicles sold. What are the reasons behind the collapse of the French market?
Atlantico: In 2022, with 1.53 million, lowest new car sales since 1975. A decrease of 6.4% compared to 1.63 million sales in 2020 and 2021, already down -25% compared to 2019. How can this phenomenon be explained?
Aurelien Bigo : First of all, for the decrease in 2020, there is the effect of the health crisis that has slowed sales at this time, through imprisonment and the economic crisis. Then other factors were added. Such as the lack of some electronic components that led to longer delivery times for vehicles. Let’s also take into account the inflation factor. An increase in the cost of raw materials will have an upward influence on the price of cars. The war in Ukraine may have also complicated, slowed down or made the market more difficult. Since 2020, there are extended delivery times and the cost of vehicles has increased significantly. This increase is also an effect of the strategy of manufacturers which have turned to more expensive models, where they will have more margins. So cars are heavier and more used. These various elements explain the decline in sales. On the one hand, there is a fall in supply caused by tensions present on the part of builders. And, on the demand side, the increase in prices that could affect consumers.
When did this car market stop in France? Why?
For years, even decades, the automotive market has been around 2 million car sales per year. The last low we had was in 1975. Since 1976, we’ve generally been pretty close to 2 million vehicles more or less than 300,000. The fleet continues to increase but the market remains relatively stable as it is more and more vehicle renewals. On the other hand, if we look at the decade before 2022, therefore from 2012 to 2021, there are vehicle sales that are lower than in the previous decade. For 13 years and until 2001, sales were more than 2 million cars. While in the last 10 years, only 3 have exceeded this bar. In 2012-2021, sales figures were 10% lower on average than in the previous decade. Thus there is potentially a medium-term trend taking shape. Regarding the hypothesis presented by the data producer AAA Data, they say a “historical turning point for the year 2022”, I’m trying to put it in context. This is not the first year it has fallen. This is even stronger than 2020 and 2021 where during this period they were years marked by the health crisis. It is certainly in this that the year is quite exceptional, after that we have to take it with a little perspective. Perhaps in the next few years there will be higher sales again, especially if the tensions on the supply side are released. As with substance shortages, it is expected that there will still be some in 2023 but fewer than this year. Then, to know exactly how far we are from a medium-term, or even long-term trend, at the moment is more difficult to say.
Selling a car at half mast, whose fault is it? Much of the crisis, little of behavioral changes
Are manufacturers losing out on this drop in demand?
Their accounts are doing well so far, as their strategy of selling fewer but more expensive models is paying off in the short term. Today, the results of manufacturers for the first half of 2022 are very good. Although we can expect to see lower results due to lower sales. So far, with this approach, they are doing great. Then, you have to ask yourself about the consequences that could happen for their own customers in the long run. Until now, this strategy has not been noticed by the general public, in the sense that sales levels are still relatively high. The price of cars has not increased much. On the other hand, now with the combination of a sharp drop in volume and prices rising sharply, both in the new and second-hand markets, it is being felt by the general public. These price increases have an impact on the second-hand market as some of the buyers of new cars are turning to these vehicles. This increases demand and therefore prices. So we are in a situation where the increases are more visible for all motorists who want to renew their car and not just for the wealthiest households who can afford to buy a new one.
What are the consequences for motorists?
The consequence is essentially in the level of costs for the purchase of vehicles for renewal. In a more general context, vehicle spending is higher for users, particularly for fuel. In comparison, and this is problematic, the State and the local authorities have implemented few alternatives to the thermal car on a sufficient scale for a large part of the population to switch to other forms of transport that are cheaper. What goes in the direction of energy transfer and the environment is also good for the wallet and purchasing power (public transportation, cycling, walking, carpooling, etc.). There has been very little effort in recent years and even since the war in Ukraine. There are hardly any new measures to help get rid of dependence on cars and oil, both of which are very expensive for motorists.
The breakdown: Despite a strong recovery in activity, car sales have fallen and no recovery is expected
What role should the state play in this car market?
In the automobile market in particular, there is now a strategy of manufacturers that is not aligned with the general interest in some elements. Both on the purchasing power side, that is, for most people who do not have the possibility to buy in the new market, they rely on the second-hand market. For this population, the vehicles present in this market will be too expensive and too large in relation to their needs. In this type of context, the State should have intervened to ensure that manufacturers offer lighter and cheaper vehicles both to buy and to use. Obviously there is enough help so that those less fortunate can have access to them without having to wait for these cars to hit the second-hand market. Now there are subsidies in place but they support a market of large cars that are too expensive for the poor. So there are issues related to purchasing power, as well as in terms of the type of vehicle that will best meet users’ needs. There is a misalignment between real needs and what is offered in the market. We will also see a massive delay in terms of fleet renewal towards vehicles that are both more electric and more sensible. These are the two main trends necessary to succeed in this challenge of energy and environmental transition. In terms of fuel-efficient cars, public authorities have intervened too little in the market to succeed in directing it towards lighter vehicles. There is a tax on the weight of vehicles that has been implemented since the beginning of 2022. However, with a penalty limit starting at 1800 kg, which concerns less than 2% of vehicles sold. There is no concrete effect on this type of punishment. Above all, the heaviest models, therefore electric cars and plug-in hybrids, are exempted from this penalty. While certainly ensuring that these vehicles also turn in more gentleness there is an interest in having a weight penalty.
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Ultimately, who are the winners and losers in this new situation?
In terms of winners, it’s a bit difficult because there are trends going in different directions. So far, car manufacturers are doing well in the current situation. We will have to see how they fare in 2022, but in any case they should not be pitied. Their accounts work well and their strategy works well in the short term. In my opinion, the main losers in this situation are the motorists who end up with higher movement costs. In terms of transition, in general, fleet renewal does not go to fuel-efficient vehicles, which is highly undesirable. Selling fewer cars can have a positive effect on emissions but at the same time leads to less vehicle fleet renewal. And we know for sure that it is now not really compatible with our climate goals. Slowing down a renewal that should lead us to less impact is a negative point. Finally, the State or the regulator among the actors is a winner? Somehow, they have to support the general interest. It depends on the perspective one gives of the goals set by the State itself. If the goal is to accelerate the transition to more sensible and electric vehicles, all in a fair way, we are way off the mark…