Five years ago there were still a dozen cars under 200,000 pesos: Volkswagen Gol, Ford Figo, Hyundai Grand i10, Fiat Uno, Chevrolet Spark and Beat, Mitsubishi Marage, Suzuki Ignis, Renault Logan, Nissan March… Practically all brands had a small and accessible vehicle in their catalog. Some of these models even cost less than 160,000 pesos, but now half of them have been discontinued and the other half have crossed the 200,000 peso barrier.
Today the cheapest model offered in the local market is the Renault Kwid , a subcompact car whose entry version costs 215,900 pesos , according to the website of the company of French origin.
Some entry versions of a handful of models are around 200,000 pesos, however, “there are not many of those anymore,” says Horacio Chávez, general director of KIA Mexico. “Today the average price of (volume) vehicles is already closer to 300,000 pesos,” he added.
The consultant JD Power calculates that the prices of new cars accumulate an increase of up to 14.8% per year, the highest observed in the last decade, as a result of a generalized inflation in raw materials, to a decrease in supply due to the scarcity of chips as automakers are less interested in selling small, affordable models.
Why have cars gone up so much in price?
The inventory of vehicles has been dramatically reduced around the world due to the lack of semiconductors, which amid the demand for laptops , consoles and smartphones, became scarce for automakers. The international consultant IHS Markit points out that in 2021 9,580,911 units ceased to be produced in the world.
“The price is driven, among other things, by scarcity. It is a matter of supply and demand,” says Lucien Pinto, director of Sales and Marketing for Ford in Mexico.
The assemblers have also faced the increase in the prices of raw materials and higher logistics costs. “A container that used to cost you $8,000 today costs $29,000,” details the Ford manager.
Steel, a key casing material, hit a high of $1,945 on Aug. 31, while nickel hit as high as $21,425 on Oct. 21.
Aluminum, necessary for the manufacture of engine heads and transmissions, reached an annual maximum of 3,229 dollars per metric ton on October 18 of last year, not seen since July 2008, according to a report by Banco Base.
Finally, more automakers are abandoning entry-level segments, such as city cars and hatchbacks , to focus their efforts on larger, more profitable models. SUVs have gained ground globally and Mexico is no exception. About a third of new vehicle sales are of this type, according to AMDA data.
General Motors, for example. Months later, Ford also stopped selling its Figo subcompact sedan. Both brands have left these segments behind to concentrate on their electrification plans.
“It was not easy to give up a share (market share) that you had for a vehicle that you were selling cheaply, but which you lost,” says Pinto. “But other brands are already following Ford’s strategy. They say: ‘I’m not good at competing in these segments, so I better leave and dedicate myself to other more profitable ones,'” he adds.
This year, Volkswagen also announced that and to concentrate on strengthening its range of SUVs. Years before, it also discontinued its Gol model.
Will prices continue to rise?
The consultant JD Power highlights that the price of vehicles increased 8% annually in the last decade, as a result of inflationary adjustments and the incorporation of more technology in the units, from increasingly large screens to new autonomous driving functions.
Manufacturers now anticipate that electrification will continue to push prices up. “I don’t think we are going to return (at prices below 200,000 pesos), quite the opposite. I think that rather, due to the issue of electrification, the vehicles are going to come at higher prices,” says Pinto.
Gerardo San Román, director of the consulting firm JATO Dynamics for Latin America, considers that although this escalation in prices “is like a bubble that will burst at some point”, whether they stop rising at double-digit rates will depend on availability. of semiconductors for the assembly of the units. The specialists consulted agree that, as the sector’s supply chain normalizes, prices will stabilize.
– Are prices going to return below 200,000 pesos?
-Back or to gain momentum, they say over there. The vehicles are no longer going to return to those levels, concludes Pinto.
