Soaring car prices: is Citroën's new strategy the right answer for the new automotive market?

A recent study by JATO Dynamics has highlighted a profound transformation in the German automotive market, often considered Europe's most demanding and representative. Between 2019 and 2024, this market experienced a spectacular increase in the price of new vehicles, paradoxically coupled with a significant decline in sales volumes. This detailed analysis offers crucial insight into current market dynamics and provides context for Citroën's new strategic direction. Far from being a risky gamble, the French brand's return to a more accessible offering could very well be the most intelligent response to a rapidly changing market.

 A transformed market of surging prices and falling volumes

The figures speak for themselves, painting a complex picture. In the span of just five years, the average transaction price of a new car in Germany jumped by an astonishing 38.5%, rising from €30,163 in 2019 to €41,781 in 2024. This increase of over €11,600 per vehicle is substantial. Simultaneously, annual sales fell by 22%, from 3.6 million to 2.8 million units. Yet, in a paradoxical twist, the industry's overall revenue grew by 8%. In other words, the German automotive sector is selling far fewer cars, but at much higher prices, offsetting the drop in volume with a higher per-unit value.

Electrification is often pinpointed as the main driver of this inflation, and it is indeed a contributing factor. The market share of Battery Electric Vehicles (BEVs) grew from 2% to 14%, and the share of hybrids (MHEV and PHEV) exploded. These technologies, being more expensive to produce, have mechanically driven prices upward. However, they don't tell the whole story. The JATO study specifies that the shift to more expensive powertrains accounts for only 17 percentage points of the total 38.5% price hike. The remaining 23 points are attributed to general inflation and product enrichment, as manufacturers have tended to simplify their lineups by cutting entry-level versions in favor of better-equipped, and thus more expensive, trims. The most direct consequence of this strategy is the collapse of lower price segments. Sales of cars under €15,000 have been virtually wiped out, plummeting by 97% in five years. In total, the market has lost over a million units in the sub-€30,000 price brackets. Yet, amidst this upheaval, one category of vehicle is thriving, proving that another path is possible.

The relevance of Citroën's strategy

While traditional mainstream and premium brands are seeing their volumes shrink, the "value for money" segment is showing remarkable health. A brand like Dacia, for example, saw its average selling price increase by 48% between 2019 and 2024, from around €10,700 to €15,900. And yet, over the same period, its sales volumes grew by 19%. This success can be explained by a shift in its positioning: from a purely "low-cost" player, the brand has evolved into an accessible mainstream choice, offering modern and desirable products at a fair price. It has thus captured a customer base that could no longer, or would no longer, keep up with the rampant inflation of the rest of the market.

It is precisely in this arena that Citroën's new positioning makes perfect sense and emerges as a particularly relevant strategy. By offering vehicles that provide significant value for their price, the brand is not just following a trend; it is directly addressing the market fracture highlighted by the study. Citroën even offers a superior value proposition by adding its unique DNA of comfort, bold design, and practical innovations. The launch of the new C3 is emblematic of this approach: offered from €15,700 in its petrol version—nearly €5,000 less than the previous generation—it aggressively targets the sub-€20,000 segment, where demand is high but supply is almost non-existent. The C3 Aircross follow the same logic, with a starting price announced at €19,700. Furthermore, Citroën is making electrification accessible without compromise with the ë-C3, available from €23,300 (before government incentives), offering a range and features that place it right in the heart of the market.

In conclusion, the analysis of the German market serves as a warning for the entire European automotive sector. With sales levels still far from their 2019 peak, the industry faces a major challenge: the disengagement of a large portion of customers confronted with unaffordable prices. The ratio of the average salary to the price of a new car has deteriorated by 11% in Germany, turning the purchase of a new vehicle into a luxury item for many.

In this difficult context, where core mainstream manufacturers find their positions weakened, Citroën's strategy appears not only as a breath of fresh air but, more importantly, as an extremely shrewd economic and commercial move. By choosing not to participate in the price race and instead focusing on an accessible, fair, and innovative offering, Citroën is doing more than just reconnecting with its historical values. The brand is ideally positioning itself to capture a significant share of a market desperately seeking smart and affordable mobility solutions. Time will tell if the bet pays off, but all indicators suggest that the path chosen by Citroën is the right one.