Why Are New Cars So Expensive? CNNAuto Expert Gets It All Wrong.

Consumer Choice is not the issue.

A recent news story on CNN suggested that car buyers are to blame for the surge in vehicle prices because they are ordering more options, ultimately driving up the cost of automobiles. CNN’s auto expert Peter Valdes-Dapena was interviewed and theorized about how consumers’ choices may be affecting car prices.

However, a closer examination of why new cars seem more expensive reveals that the real factors contributing to the higher prices are the ongoing supply chain issues and the strategic decisions made by car manufacturers to prioritize the production of more expensive models with option packages to maximize profits.

Supply Chain Issues

The global automotive industry has been grappling with a series of supply chain disruptions in recent years, including the shortage of semiconductor chips, which are vital components in modern vehicles. The chip shortage has led to reduced production capacity, forcing manufacturers to make tough decisions about which models and features to prioritize. As a result, many carmakers have chosen to focus on producing higher-end vehicles with more options, as these offer greater profit margins which makes the available new cars seem more expensive.

Moreover, other supply chain issues, such as the rising cost of raw materials and logistical challenges, have exacerbated the situation, further impacting vehicle production and availability. These factors have created a perfect storm, leading to higher prices for new vehicles across the board.

Manufacturer Priorities

In addition to supply chain challenges, new cars are so expensive because car manufacturers have been adjusting their priorities to maximize profitability in a constrained market. Faced with limited production capacity, many automakers have opted to concentrate on manufacturing vehicles with higher price tags and more extensive option packages. This strategy allows them to generate greater revenue from each unit sold, compensating for the reduced overall output.

Furthermore, some manufacturers have been streamlining their product offerings, reducing the number of available trim levels and options to simplify the production process. This move can lead to the appearance of consumers “ordering more options” when, in reality, they have fewer choices available to them due to the limited range of models and configurations offered by carmakers.