That combustion-engined car will cost you more

We all imagine that car price rises are being driven by electric cars, and they are – but perhaps not in the way you think.

Prices of combustion cars are actually rising faster than EVs in the UK, with the average shooting up by 29 per cent from £32,835 in 2019 to £42,493 in 2024 according to new research from market analyst JATO Dynamics. In same period EV prices rose 17 per cent to £59,461.

There are many reasons for the rise, including extra safety legislation and a simple desire to make more money. But we’re going to be seeing a lot more punitive pricing on cars burning petrol or diesel – with the express purpose of steering buyers towards EVs.

Stellantis has already admitted doing this as it scrambled to hit the mandated EV targets for 2024 in the UK, resulting in dramatically reduced sales of combustion-engined Vauxhalls. If you’re not selling enough EVs then one way to avoid massive fines is to redress the percentage balance by suppressing sales of petrol-powered models.

In France both Renault and Peugeot have recently increased prices of standard combustion models to steer customers toward lower-emission versions. In the UK our more sophisticated sales system offers more levers, but it has the same effect.

For example the Vauxhall Corsa is currently being sold with an 8.9 per cent finance for the 1.2-litre petrol or 2.9 per cent for the electric version. The result? Monthly payments that favour the EV.

In the future, we expect combustion models to come with a higher price to reflect the car maker’s greater costs over EVs – greater not when it comes to building it, but in the threat of fines for selling too many.

As a manufacturer, if you gorge on cheap petrol runabouts you risk busting your combustion limit or target CO2 figure (depending on whether you’re selling in the UK or the EU). Solution? Reposition combustion-engine models as a long-range premium option and generate higher margins from fewer sales.

Dealers will find new ways to make you pay

Car dealers don’t make the bulk of their money from actually selling cars. No, the profits mainly come from aftersales, including servicing and something dealers call F&I, standing for finance and insurance. Both sources of income are, however, under threat, prompting dealers to cook up new ways to make you pay.

Servicing is the big money spinner. In the most recent accounts published by Bristol Street Motors’ parent company Vertu, the dealer group revealed that aftersales generated almost half its profits, despite accounting for just nine per cent of revenue. The margins on servicing alone were an eye-watering 72 per cent.

Vertu said it had made ‘considerable investment’ to grow the aftersales side of the business. For example it has rolled out a ‘buy now, pay later’ scheme, encouraging more people to agree to have work done by the dealer.

The trouble is that electric cars don’t need as much servicing. Take Tesla, which unlike most other manufacturers operates its own dealer network. The EV maker emphasises on its website that its vehicles don’t require annual maintenance or regular fluid changes. The legacy brands aren’t following suit, however, knowing they risk alienating their franchised dealer partners by cutting off a crucial revenue stream.

So EV owners are being forced to pay for regular servicing such as brake-fluid changes, despite the much-reduced use of conventional braking in an EV, or face voiding the warranty.

In the past dealers would have pressured their sales staff to sell more F&I add-ons in times of reduced profits, but that nice little earner is under threat.

For example in 2024 the Financial Conduct Authority clamped down on GAP insurance (Guaranteed Asset Protection; it pays out the difference between the car’s value and the finance left to pay) after discovering that around 70 per cent of the value of the insurance was just commission to the dealer.

Commissions for selling finance have also been curtailed after pressure from both the FCA and the law courts.

Other than ratcheting up aftersales, some dealers are clawing back lost earnings by adding a fixed fee to used-car sales, inflating the final bill in a move borrowed from the budget airline and events industries.

The names you know and trust will start to vanish

This year we say goodbye to a staple of the British best-selling charts, the Ford Focus. When the last example rolls out of its similarly doomed German factory late in the year, the stalwart of the compact hatchback segment since its launch in 1998 will follow the smaller Ford Fiesta into history books with no replacement planned.

Ford is now moving away from conventional cars in a bid to produce ‘superhero’ models like the Capri that in theory we’ll become more emotionally attached to. Or put another way, pay extra for.

The older order is changing. In November 2024 in the UK long-time sales leader Ford was only the fifth biggest brand, according to figures posted by the trade body, the SMMT. Its traditional rival for the top slot, Vauxhall, sensationally fell out of the top 10.

The established brands are struggling to compete on price with newcomers from China, who are leapfrogging the establishment. MG, owned by China’s SAIC, was the seventh biggest brand in November, above Kia, Toyota and Hyundai.

BYD meanwhile overtook Honda, Jeep and Fiat, while Omoda (a new brand from China’s Chery, along with Jaecoo) outsold Suzuki and Subaru.

More are coming. This year GWM (formerly Great Wall Motors) launches the hybrid-focused Haval brand with the Jolion Pro compact SUV costing from £23,995. It’ll go head to head with the Toyota C-HR hybrid, costing from £31,300. With plenty of affordable EVs to satisfy legal sales requirements, the Chinese manufacturers can afford to rampage through the combustion segments too.

The Chinese will do much to reduce the price inflation UK car buyers are enduring right now but at the expense of traditional brands and once-popular models.

New cars will be more glitchy

Everyone is looking to develop cars faster these days to counter the speed of the Chinese – who work far longer hours – and ensure the model is still relevant when it hits the market.

While safety is still a top concern of established car makers, the software element is increasingly seen as something to be finished off via over-the-air updates rather than delivered as the finished article.

The £100,000 Volvo EX90 electric large SUV, for example, initially won’t be shipped with working Apple CarPlay or Android Auto, arguably the two most important pieces of in-car software for most European drivers.

Getting the software right is crucial when you’re assigning more and more control to the dashboard screen, but such is the difficulty in creating ‘software-defined’ cars that increasingly the car makers are mending glitches post-sale.

Car makers can call on new tech to increase the speed of car development, including virtual reality spaces for designers situated in different time zones to interact with a model of the car’s interior. But nothing really beats physical testing, and the danger with a majority digital development is that the physical tester becomes you, the poor sod who buys the car.

Your car will nag you even more

The European Union’s general safety regulation phase 2 (GSR2) came in for all new cars last year. Along with warnings of excess speed linked to an (all too often unreliable) speed-limit detection system, the car must have a driver-monitoring system to check whether the driver is actually looking at the road.

Already the admirable intention is being undone by poor implementation, sending the worst cars into a frenzy of beeps if you’ve dared to search the infotainment menus to turn up the heating.

Now the highly influential European safety organisation EuroNCAP is looking to tighten that up by awarding points to new cars based how well the monitoring system is actually doing its job, and not letting by sly glances to your phone.

The safety organisation, whose influence has persuaded car manufacturers to go much further than government-mandated regulations, has identified different ways we turn our heads in an effort to decode our intentions. Either we ‘owl’, meaning a head rotation followed by the eyes, or ‘lizard’, where only the eyes turn. Points would be lost for any system that fails to spot the latter, so sorry lizards.

NCAP wants systems to alert drivers looking away ‘for a cumulative 10 seconds within a 30 second time period’. Better hope your car’s Spotify has good voice activation.

Under GSR2 the system should be activated for every journey, if it can be switched off. NCAP will mark down any cars that offer to switch it off with a single push on a button.

NCAP also awards points for systems that detect drowsiness, although so far the organisation is not awarding points for physical ‘interlock’ breath-testing for alcohol.

This could go two ways. NCAP might be doing us a favour by ensuring systems actually work as intended and not beep-scolding normal behaviour. Or it could turn car makers even more paranoid, preferring to yield to the mighty NCAP rather than customer concerns.

Happy new year.