In a sector that is always advancing and improving, it is a continual juggling act for automakers developing new product and pricing strategies. To succeed in today's automotive market, it isn't simply about having the lowest price or the most features but rather finding the right balance of value-for-money that resonates with consumers. Using the German car market as an example, we see this in practice as we look at the evolution of car value trends over the last 10 years…
Over the last 10 years, the average retail price (weighted for volumes) for passenger cars in the German market has increased year on year due to various factors including price inflation, introduction of new powertrains, and semiconductor constraints to name but a few. These combined effects have led to an overall price increase of 56%, from €30.5K to €47.5K.
Meanwhile, new features have been introduced in cars, safety standards have improved, new technologies have been launched, and design elements such as interior ambient lighting and synthetic leather have become more common.
Using JATO's value analysis methodology, we can attribute an economic value to all the main features in a car, creating an indicator that shows how the product value has changed over time. Applying this analysis to calculate the average value of standard equipment in a car and its trend over the years, we can see the overall value has increased by 74%. This indicates that today's cars are not only much richer in features than those from 10 years ago, but also the level of equipment in German market has grown significantly more than the price.
Focusing on the ratio between value and price, we see that it increased up to 2019, meaning price increases were supported by product improvements. However, over the last five years, which have been the most challenging in terms of pricing, this relationship has remained stable or has slowly decreased.
Our in-depth analysis categorises the value into six different groups:
Unsurprisingly, technological features have seen the highest increase, with Safety (including ADAS) growing from the fourth to the second position in terms of relevance, initially driven by European regulations.. Connectivity and infotainment have also grown in importance.
While design features and comfort have increased in value, representing an enrichment in content, their weight in the overall car value has decreased, with dynamic characteristics remaining stable. This reflects the recent evolution of product and customer interests, which are more related to technological features like ADAS, entertainment screens, and connectivity solutions. These elements are being pushed even further by newcomers such as Tesla and the upcoming wave of Chinese OEMs.
The numbers in the previous chart represent an average weighted for volumes in the German market, but how does the value proposition differ across brands? And who offers more "value for money"?
To answer this, we compared top traditional brands with newcomer Chinese brands in the mainstream market and with Tesla in the premium market.
Traditional mainstream brands offer an average ratio of content versus list price of 37%, while premium brands are around 28%, leveraging intangible assets of brand value to support higher price positioning.
Newcomers, both mainstream and premium, leverage a better value-for-money ratio (44-45%), offering lower prices and richer standard content.
Further analysis reveals differences between brand categories. Newcomers offer more technologies, such as wider infotainment screens and standardised features like electric seat regulation, parking assistance, and autonomous driving. They also include tangible design elements including synthetic leather seats and glass roofs, which are less common as standard on traditional brands.
Conversely, traditional OEMs offer better connectivity solutions, mostly telematics, and features such as Carplay and Android Auto, which are not available on Tesla.
Among common paths and strategies, Dacia stands out by differentiating its approach from the rest of the market.
Despite offering fewer rich contents than other mainstream brands, Dacia's lower list price makes it an aggressive proposition with almost a 50% value-for-money ratio. This unique strategy could explain how the Dacia Sandero became the best-selling car in Europe in 2024.
In recent years, products have become not only more expensive and complex but also richer in content and features. This has been driven by new regulations, especially in safety, and the spread of new technologies becoming standard equipment.
New production solutions, economies of scale, and complexity reduction policies have made once-expensive features like leather seats and glass roofs standard, allowing some OEMs to deliver higher value to consumers at competitive prices.
Understanding and implementing this approach in the concept and pre-production phases to define a key strategy can differentiate the product value proposition. It can enable a brand to leverage not only pricing and discounts but also the "value for money" delivered to the customer, opening new opportunities for success based on real-time intelligence for each market.
At JATO, our comprehensive data enables automakers to identify and understand trends. We know what features are popular in various regions and the real value that consumers put on them. Our automotive intelligence experts analyse the insights to identify competitive set in a specific market, while setting a benchmark and recommending the right strategy for improving or leveraging market position for better success.
To ensure your feature value and price ratio is right, book a consultation with one of JATO’s Advisory experts to find out more.
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