New car prices have fallen out of step with demand. Automakers increasingly find themselves with too many expensive, high-end cars to sell. However, designing new models for the neglected inexpensive vehicle segments will take time.
What can automakers do more quickly? Produce less expensive trim levels.
Industry publication Automotive News reports, “Automakers are responding to mounting concerns about vehicle affordability by producing more lower-end trims, creating value-focused special editions of popular nameplates and in some cases resurrecting base models they had killed off.”
Many Automakers Targeted the Luxury Market
Since about 2017, nearly every automaker has adopted a similar business strategy — go after the wealthy.
A recent analysis by Kelley Blue Book parent company Cox Automotive noted that, in December 2017, automakers produced 36 models priced at $25,000 or less. Five years later, they built just 10.
At the other end of the price scale, the selection of available cars grew.
In December 2017, automakers offered 61 models for sale with sticker prices of $60,000 or higher. Last December, they offered 90. Over-$60,000 cars made up more than a quarter of sales in December 2022. Five years earlier, they constituted less than 8%.
That plan is still paying off for some. Last month, the average new car sold for a near-record $49,740. Americans bought a record number of cars priced at $80,000 or higher.
But the plan has left holes in the market.
The Base Trim Reborn
Car and Driver notes, “Several companies expressed plans at the recent NADA [National Automobile Dealers Association] show in New Orleans to cater to customer demand by launching less expensive models in the near future.”
Automotive News explains, “Ford, Mini, Mitsubishi, and Ram told dealers at the NADA Show in New Orleans that they would build more affordable vehicles. Chevrolet, Chrysler and Volkswagen are among brands that already have moved to offset rising vehicle costs with less expensive products.”
In most cases, that means the return of base trim levels with fewer expensive, high-end features.
Honda moved first, bringing back the once-canceled LX trim on its CR-V and Pilot SUVs in late 2023.
Now, others are answering. Car and Driver points out, “Ford brass said it would boost production of the F-150’s STX trim — the second least expensive variant — as well as lower trims for the Escape and Explorer. Ford also brought back the base model for the Bronco off-road SUV for 2025.”
The Drive adds that Ram “is planning lower-priced 1500 trims (after dropping the 1500 Classic).”
Volkswagen, AN notes, “in October added a value-oriented Wolfsburg Edition to the 2024 Tiguan compact crossover, the brand’s top-selling nameplate. In just three months, that model accounted for 6 percent of 2024 Tiguan sales.”
Cheaper Models, Inexpensive EVs Coming
Base models may be the quickest way to bring down pricing, but some automakers have also put energy into the least-expensive segments of the market with all-new models.
Chevrolet’s redesigned Trax subcompact SUV had a strong 2024, and its Buick Envista platform-mate has proven an early sales success.
Car and Driver reports that the success of those subcompact models has “been felt by a wide variety of automakers, and if their comments from the NADA show are any indication, they seem to be listening.”
Electric vehicles (EVs) could also help drive prices down. Automakers tend to build expensive EVs first and add more affordable models over time as sales of high-end EVs pay for the research, development, and tooling costs of launching new EV projects.