Why are manufacturers increasing the price of thermal cars?

Manufacturers are increasing the prices of thermal cars and lowering the prices of electric vehicles. The objective of this strategy is to prepare for the tightening of emissions standards in 2025.

European brands are preparing for greater constraints in terms of polluting emissions. But with the slowdown in the electric car market, they face a delicate equation to solve. This is why they will increase the price of thermal cars at the end of 2024.

Currently, electric cars represent around 13% of the market on a European scale. To meet the 2025 standards, this share must rise to around 20%. Raising the prices of cars with combustion engines should artificially drive customers towards electric vehicles.

In any case, this is what manufacturers are hoping for, who could face colossal fines. If they keep the same shares of sales by energy, they could have to pay 15 billion euros in penalties.

Hence the idea of ​​making thermal cars less accessible. The Renault, Stellantis and Volkswagen groups have thus added a few hundred euros to the price of their gasoline or diesel engine cars.

“Carmakers have started to implement a pricing strategy aimed at steering demand towards electric cars in order to meet CO2 targets and avoid potential fines” said Beatrix Keim of the Center for Automotive Research.

Finance future reductions on electricity?

Peugeot notably increased its thermal models by €500, and Renault increased them by €300. However, a source close to a manufacturer revealed to Automotive News Europe that this could have the effect of reducing thermal sales, without any particular effect on the electric market.

“In reality, the increase in the price of thermal engine cars implies a reduction in production. And the entire value chain and suppliers will suffer” said this source.

The price increase should help finance future promotions on electric models. This is a way for manufacturers to also compensate for the reduction in aid to convince customers.

Fortunately for brands, there also remains the possibility of partnering to share broadcasts. Emissions “pools” allow manufacturers to buy credits from others who are ahead of the transition.