You know the car industry has a giant affordability problem when a manufacturer unveils a concept vehicle whose roof and hood are made from reinforced cardboard.
With low-cost credit no longer lubricating sales and recession fears growing, automakers will need to find other ways to cut buyers some slack. Otherwise they risk being displaced by cheaper competitors or alternative modes of transport. Those able to offer consumers a no-frills vehicle at an attractive price — like Renault’s budget brand Dacia — should benefit.
General Motors and Chrysler filed for bankruptcy in 2009 when soaring fuel and raw material prices caused buyers to reject Detroit’s gas-guzzling trucks and SUVs and consumers turned instead to more fuel-efficient Asian sedans. Stricter emissions standards and the need to include costly entertainment and safety equipment had already dented the economic case for building small vehicles; many of these entry-level models aren’t being replaced.
Governments can help struggling consumers by subsidising leasing for those on low incomes or offering larger purchase incentives for the cheapest electric models. From a consumer perspective, the Biden’s administration’s EV tax-credit reforms are, however, a mixed blessing because domestic manufacturing and raw-material sourcing rules will make cheap Asian imports less competitive.
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