Not just South Africa – Germans can’t afford new cars either

In the gritty German industrial city of Bochum, a family-run car dealership once counted small affordable vehicles as its bread and butter, but it has adapted to deepening inequalities by no longer selling factory-fresh hatchbacks and wagons at all.

Sticker prices on new models have risen faster than wages in recent years, adding to other cost-of-living increases on everything from housing to food and energy.

The combination has squeezed spending power and put new vehicles out of reach for Auto Feix’s working-class clientele in Bochum, once the home of a thriving budget-car factory. 

“Customers simply have less money in their pockets,” said Kerstin Feix, managing director of the nearly century-old company. “For many, a brand-new car is no longer affordable.”

The situation has gotten worse since the introduction of stricter rules on automakers in recent years and means a new car now costs about 43 weeks of wages for an average German, compared with 32 in 1995, according to Bloomberg calculations.

New-car sales in Europe’s largest economy remain below pre-pandemic levels, with electric models — central to the European Union’s climate strategy — proving too costly for most buyers.

As automakers retreat from the budget segment, the trends deepen a sense of exclusion for working families and represent a rupture from the era when the Volkswagen, or people’s car, was a source of national pride.

“The automobile remains bound up with the idea of freedom and autonomy,” said Oliver Nachtwey, professor of social structure analysis at the University of Basel and an expert on rising inequality in Germany.

“For older generations and for people in smaller towns, car ownership still signifies independence — the ability to leave, to move, to live on your own terms.”

Discontent over declining living standards isn’t limited to Germany and sparked the yellow-vest protests in France in 2018 and demonstrations over housing shortages in Spain this year.

As inflation shot up in the aftermath of the Covid pandemic, Auto Feix expanded repair bays to help keep cars running longer and switched sales completely to second-hand models.

The cars are usually less than a year old, which means the initial depreciation has taken place and they can be sold for thousands less. Years of economic stagnation and growing anxiety over job security offers little chance of reverting to new cars.

“The price is the most important thing,” said Feix, who’s been selling cars in Germany’s Rust Belt for three decades. “People are well aware they can’t afford what they used to.”

Auto Feix’s flagship store is located near a now-defunct car factory that once churned out the Opel Kadett. The model was an icon of Germany’s postwar expansion and, like the VW Beetle, offered mobility, comfort and status for the growing middle class. After closing in 2014, the site’s conversion into a logistics hub is emblematic of a widening shift away from stable manufacturing jobs toward more precarious service work. 

Read More: Germany’s Days as an Industrial Superpower Are Coming to an End

Dwindling buying power has contributed to the demise of entry-level models across Europe. The VW Up, Opel Adam, Ford Fiesta and Citroën C1  have all been pulled in recent years. With such options gone, more demand has shifted to the used market, but those cars have also become more expensive, with prices rising 88% on average in Germany over the past decade. 

“Car manufacturers are no longer as focused on volume as they once were,” said David Di Girolamo, global head of professional services at auto data firm JATO. “They’re now prioritizing models that deliver higher margins and more efficient production. The volume-driven approach that dominated before the pandemic just hasn’t come back.”

The shrinking affordable car market is not just a demand issue. Autos have also become more expensive to build due to higher raw material costs and supply-chain constraints on rare earths and chips.

A thorn in the side for the industry has also been tighter rules on safety and emissions. Compared with 2015, today’s cars have to include automatic braking, lane-keeping assistance and driver-fatigue detection, equipment once reserved for upscale models. 

With sales sluggish, carmakers need to sell high-margin models to help finance technologies for electric and self-driving vehicles. Entry-level models that have survived are noticeably more expensive. In Italy, the Fiat Panda — for decades the face of affordable mobility — sold for around €9,000 in 2010. The updated version starts at €15,950, a nearly 80% increase in 15 years.

While policymakers praise the rules for making European cars among the safest in the world, manufacturers say the regulations are hampering their competitiveness and have called on authorities to ease off.

EU rules are “imposing a pace, which is not what the customer wants, not what the customer needs, not what the customer can afford,” Antonio Filosa, the chief executive officer of Stellantis NV — the parent of the Opel, Fiat and Citroën brands — said at a French auto industry event this week. “We need to change, we need to change big.”

The issue of affordability is critical for Europe’s automakers as they battle to compete with Chinese rivals in electric cars. The VW ID.3 — originally positioned as the Beetle of the electric-car era — starts at €33,330, or 65% more than the Polo hatchback.

By contrast, the electric-powered Dolphin Surf from China’s BYD costs as little as €22,990 in Germany.

Struggles to buy a vehicle lays bare how economic pressures are fraying the social fabric in Germany, the inventor of the automobile. The mood is reflected in national surveys showing households turning gloomier as incomes weaken.

Anxiety about Germany’s marquis industry is in turn having political fallout. Chancellor Friedrich Merz and his conservative allies are pushing the EU to soften a ban on the sale of new combustion-engine vehicles from 2035 to defend the auto industry — a reaction to pressure from the far-right Alternative for Germany, or AfD, which is leading in some polls. 

The German government has also introduced new EV incentives for lower-income households, but many renters don’t have home charging and so remain reliant on costly public stations, which risks deepening inequality in the shift to electric cars.

Once anchors of postwar success, Germany’s industrial heartlands have become incubators of discontent. Skepticism toward green policies and their impact on jobs feed into broader frustration with Berlin’s ruling coalition and play into the AfD’s promises of reviving combustion traditions.

“The auto industry is building electric cars for richer people and families are being left behind,” said Christian Loose, an AfD lawmaker from Bochum, pointing to the shuttered Opel plant. “Policemen, nurses, anyone who needs a car — these are important clientele for us.”

The auto industry has tried to make a case that electrification and affordability can coexist. At Europe’s biggest auto show this year, Volkswagen unveiled the ID. Polo, with a base price below €25,000.

Sister-brand Škoda followed with its Epiq crossover at roughly the same level and more than 400 kilometers (250 miles) of range.

Yet even these models may be out of reach for many buyers.

About one in five Germans is at risk of poverty or social exlcusion, according to the country’s statistics office, a share that’s been edging higher after years of economic stagnation. 

In Bochum, Feix says she hears frustration turning into quiet anger as customers complain about feeling written off.

Despite the headwinds, she remains pragmatic and sees selling slightly older combustion cars as a good strategy for her and her customers.

“We can save them a few thousand euros,” Feix said. “They get the car they want and they can still afford it.”