The Budget New Car Has Disappeared in Germany

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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. 

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“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.”

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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.

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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. 

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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.

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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.

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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.”

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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 Co. costs as little as €22,990 in Germany.

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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.

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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. 

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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.

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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.