July 23, 2002
Study says there are still substantial vehicle price differences in European Union
Brussels, Belgium – In its latest report on car prices, the European Commission has found that price differentials for new cars in the European market are still substantial, despite the introduction of the euro. The situation as of May 1, 2002 shows that no significant price convergence has yet taken place. Spain, Greece, Finland and Denmark, a non-member of the euro zone, are the markets where car prices before tax are generally the lowest. Prices in Germany, the biggest market, and Austria, are the highest within the euro zone. The survey shows no discernible pattern of price approximation between the cheapest and the most expensive national markets, that is, price increases in the former and/or price decreases in the latter.
Competition Commissioner Mario Monti declared: “Our monitoring of price differentials and other indications have been regularly confirming that there is significant room for improving the functioning of the internal market in the motor vehicle sector. The reform adopted by the Commission on 17 July 2002 creates the right conditions for competition in car sales and servicing, making the internal market work to the advantage of European consumers and economic operators alike.”
This report on car prices portrays the situation on national car markets on May 1, 2002, that is four months after retail prices started to be denominated in euro in the twelve Member States participating in the monetary union. Therefore, the report gives an indication as to whether pricing policies have been adapted in response to monetary integration and as to the extent to which competition forces are instrumental in integrating markets. For the moment, enhanced price comparability due to the Euro has not led to greater price convergence.
Within the euro zone, Germany and, to a lesser extent, Austria, still remain the most expensive markets. In Germany, a total of 41 models are sold to consumers at the highest prices in the euro zone and 36 of these are between 42% and 20% more expensive than in at least one other national market. In fact, differentials of more than 20% appear as well for 23 models in Austria. The cheapest markets in the euro zone are Finland with no differential above 20% for the models surveyed and The Netherlands with only one differential above 20%.
In absolute values, which are more relevant than percentages for end-consumers, the price differential on a car in the middle of the segment spectrum (Fiat Marea, segment D) may attain in certain cases as much as 4,600 Euro within the Euro zone and 6,000 Euro within the European Union as a whole. These values provide a relevant indication of the potential savings which consumers may obtain by exploiting price differences in the European Union. The new rules governing car distribution should simplify these purchases, whether made directly by end-consumers, or through an intermediary who buys on their behalf. Competition Commissioner Monti has re-affirmed his commitment to investigate restrictive agreements and practices by car manufacturers that directly or indirectly impede EU citizens from buying a car in another Member State. Since 1998, the Commission has imposed fines on Volkswagen (twice), Opel and Mercedes for obstacles to parallel trade between Member States or resale price fixing.
As regards the United Kingdom, it should be noted that this market continues to be the most expensive for more than half of the models examined. Since the prices in the United Kingdom are still much higher than elsewhere, many British consumers continue to try to buy cars from continental dealers. The Commission often receives complaints from British consumers who encounter obstacles when purchasing a car in another Member State, in particular, concerning long delivery times or high right-hand drive supplements.
Across the euro zone, General Motors (Opel-Vauxhall, Saab), despite some recent price alignments on the Opel brand, the Fiat group (Fiat, Lancia, Alfa Romeo), Honda and Suzuki, are the groups which have the widest price differences. On the other hand, in general, certain German manufacturers (e.g. BMW and DaimlerChrysler) and, to a lesser extent, Ford (Ford, Volvo, Land Rover) limit price differentials within the euro zone to 15% or less.
The generally low pre-tax prices in Finland, Denmark and Greece are largely due to manufacturers’ pricing policies and, to a lesser extent, in response to high taxes on car purchase in those Member states. Most manufacturers fix pre-tax list prices at a low level, alleging that this is necessary to make the after-tax prices affordable. However, in other Member states where no such taxes are charged, prices before tax may be either roughly similar, as in Spain, or much higher, as in Germany.
In the United Kingdom, car prices include the additional cost of UK specification, in particular right-hand drive, and are affected by the high value of the British Pound. All of these aspects have to be taken into account when analysing the causes for high price differentials. The Commission has found that for British and Irish consumers buying a car in another Member State, the supplement for right-hand drive specification is generally the lowest for models from the Japanese manufacturers, and the highest for models produced by the Volkswagen group (VW, Audi and Seat).
A total of 18 (previously 17) European and 8 (previously 7) Japanese manufacturers supplied the Commission with the recommended retail prices, as of 1 May 2002, of 81 of their best-selling models.