Reverting to Combustion Engines: Manufacturers Competing with High Discounts

In the automotive industry, a reversal of trend is apparent: Contrary to general expectations of ongoing electrification of the market, current assessments by industry experts suggest that car manufacturers are once again increasingly focusing on internal combustion engine models. This is evident from an analysis by the esteemed automotive expert from Bochum, Ferdinand Dudenhöffer, who closely examined the discount strategies of manufacturers in March. The results of this study reveal that considerable discounts are being offered on new internal combustion engine vehicles, even exceeding those in the electric vehicle sector. In concrete terms, this means: Customers who opted for a model with conventional propulsion in March benefited from an average discount of 16.8 percent. In contrast, electric vehicles were offered with an average discount of only 16.2 percent. In his analysis, Dudenhöffer compared the discount offers of independent internet intermediaries of new cars for selected models, distributed among 15 internal combustion engine vehicles and 15 electric vehicles from a total of eleven different car brands. The pricing policy of Volkswagen was particularly striking. The automotive giant granted substantial discounts of up to 17.5 percent off the list price for the facelift of the popular Golf model, which is to be delivered to customers this summer. Compared to February, the discounts were only 13.8 percent. This significant discount is particularly noteworthy for a newly launched model – a strategy that was also applied to the Passat and Tiguan, albeit to a slightly lesser extent. While the discounts for Volkswagen's electric models, especially the ID.4, remain high at up to 21.7 percent, they have not increased from the previous month. With other manufacturers, a similarly stable discount policy is observable: The price reductions remain largely at a consistent level, although even in February the discounts for internal combustion engines were generally above those for electric cars. An interesting aspect of Dudenhöffer's evaluation is the reference to the end of the purchasing premium for electric cars, scheduled for the end of 2023 in Germany. Initially, car manufacturers responded to this with increased discounts for electric cars, but now a change in strategy is emerging. The comparatively low demand for electric cars and the historically higher profit margins for internal combustion engines seem to be motivating the industry to bring internal combustion engine models back to the forefront and thus better utilize their production facilities. The automotive expert Dudenhöffer summarizes the trend as follows: 'The car market is taking a new direction, where electric cars are receding into the background.' The significant discounts on internal combustion engine models suggest that manufacturers continue to expect good profits - and that in economically tougher times, tried-and-tested strategies are regaining importance.