Henry Ford’s Dream Shattered: Could Rising Costs and Inequalities Make This Symbol of Freedom for the Middle-Class a Thing of the Past?

Do people know that, just before Henry Ford proclaimed in October 1908, that “he would build a motorcar for the great multitude”, his company was manufacturing luxury automobiles, Models B and K? More than a century later, are we getting back to the pre-Model T car market? Is the gentrification of the automobile on the way, leaving the vast majority of motorists, middle-class citizens, driving more and more outdated vehicles?

A recent survey in France shows that buying a brand-new car is 35% more expensive than 10 years ago, when gross household revenues have increased by 15% on average: no surprise then that the new car buyer is more and more senior, and that the percentage of the population purchasing a new vehicle has dropped by a relative 70% in 30 years, from 7% to just above 2%. These heavy tendencies are strong and enduring drivers for the second-hand market, and not necessarily in favor of the most recent second-hand models.

The middle-class majority, driven ever further out of city centers by the housing price, also heavily bearing on its budget, is more dependent than ever on car mobility, but rising inequalities reduce its buying power, as evidenced in the report published in December 2021 by the World Inequality Lab. And not to forget one consequence of the pandemic: the recent appetite for home-working, allowing the younger generations to flee the metropolis cramped dwellings and invest in a better quality of life away from the cities. They will need a car, as well, maybe two cars, and they may not be electric in the near future, as the network of recharging stations remains sketchy in rural areas, and a decent, ubiquitous, coverage is not to be expected before the next decade, according to most experts.

Who’s to blame for this car price increase?

Car manufacturers easily target ever-more severe environmental regulations, historically, and, more recently, the cost of future electrification, the latter adding 50% to the cost of an average model, according to market heavyweights in Europe, Stellantis and Ford. Will “cheap” EVs, for the great multitude, emerge with the publicized decrease in battery manufacturing cost, placing back the Tesla S, Mercedes EQS and BMW i8 icons back in their natural luxury car niche market position? And will battery prices eventually drop, if metals get scarce with the EV mass market uptake? Just in 2021, the lithium price has jumped — mild understatement — by 240%. Which is next, Congo-mined cobalt?

Consumer defense associations blame the marketing push for heavier models like SUVs. Those generate fatter margins for carmakers and allow them an increased power to impose prices to consumers. And guess where scarce micro-processors ended up in 2021? Mostly in the more expensive models, at the expense of the small urban models.

Motorists are also responsible, as they have been asking, and have been accordingly nudged by manufacturers, for more comfort, more safety and more drivability equipment. Is the next price increase for autonomous driving on-board intelligence?

Add to that inflation, as modest as it was before the pandemic, but back with a revenge since then. some economists predict it may last for several years.

So, it looks like gentrification of the car market is there to last, for new cars at least. This, though, does not signal a massive disinterest for cars as such, far from that, as the car remains the one and only mobility tool for many, as explained above. But the hopes that decarbonizing road transport is possible by massive electrification does not seem as obvious or as quick if the car pool fills up with aging internal combustion engines vehicles, the only ones affordable to an impoverished middle-class. One way to look at this trend is through the average age of the car pool, which increased by 2% in just 2 years. Are owners keeping their car for a longer time, and is the second-hand market share growing at the expense of the first-hand market?

With what has been said above, shouldn’t we observe in the future a stronger combination of both forces, keeping your car longer, as a new car is much more expensive for a similar use (the short-term leasing tendency, where you get to drive a new car every three years, seems to be running out of steam in the recent past and company cars may not be so popular in the corporate world), and getting into the second-hand market with an even older car? If so, my usual point of view gets reinforced: biofuels are the only solution to reduce road transport carbon footprint, now and in the foreseeable future.

Philippe Marchand is a Bioenergy Steering Committee Member of the European Technology and Innovation Platform (ETIP).