Volkswagen brand is raising the prices for models with combustion engines by an average of 4.4 percent, the automaker's dealers in Germany have been told.
VW said "significant cost increases in the procurement of raw materials, energy and equipment" was the reason for the price hikes in a letter to dealers obtained by Automotive News Europe sister publication Automobilwoche.
Popular models such as the Golf, Tiguan, Passat wagon, Polo and T-Roc are included in the price increases.
The rises are due to take effect on Feb. 23.
"Even Volkswagen cannot escape high inflation. Although we are working as best we can with long-term contracts, hedging transactions and efficiency increases, the effect on costs cannot be fully compensated," VW said.
Dealers criticized the move.
"I'm stunned. Our sales are falling and they are raising prices," said a VW dealer who asked to remain anonymous.
Automakers should be cutting prices because of consumer uncertainty amid the current economic environment, dealers say.
Antje Woltermann, fom ZDK German dealer and repair association, said: "Incoming orders leave a lot to be desired. Manufacturers have to consider whether their prices are still in line with the market."
VW is not the only automaker raising prices for new models.
Last year, the average price of a new car increased by an average 5,000 euros, according to the vehicle data gathering company Deutschen Automobil Treuhand.
One VW dealer said the automaker had raised prices by nearly 11 percent between mid-2021 and mid-2022.
Customers buying cars through financing offers must also pay more. Interest rates have risen by more than 5 percent, according to the Check24 price comparison website.
Reuters contributed to this report