Euro car price divide exposed

LONDON, England -- The European Competition Commissioner has issued a blunt warning to car manufacturers after research showed continuing substantial price differences for popular models.

The latest price survey showed a Citroen Xsara that costs 11,671 euros (before tax) in Austria can be driven home for 8,366 in Denmark while a Mazda 626 available for 12,911 euros in Finland is priced at 18,859 euros in the United Kingdom.

Releasing the report, Mario Monti emphasised that: "The monitoring of both new car price differentials and possible obstacles to parallel trade in new cars remain a high priority for the Commission, particularly in view of the current preparation of the future legal framework for car distribution."

Monti said he had received complaints from British motorists hoping to shop elsewhere in the EU that obstacles, including a high price for switching the car to right-hand drive, were being placed in their way.

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Reaffirming his commitment to investigating restrictive practices impeding people from crossing borders in search of the best price Monti said that "manufacturers' behaviour will be fully taken into account" in drawing up the new EU-wide framework.

The research showed that, despite recent depreciation of the British pound, the UK was the most expensive market for 52 of the 81 models surveyed.

It did however note that in general British new car prices decreased or remained stable.

In the eurozone -- those nations which are taking the euro as their currency -- Germany, and in some cases Austria, were the most expensive places to purchase a new vehicle.

In Germany 46 of the 81 models were more than 20 percent more expensive than in at least one other euro zone market.

Greece, Finland, Spain, the Netherlands and Denmark -- not a euro zone member -- were generally the cheapest.

The report noted that the PSA group, the Fiat group, the VW group, Ford and Opel and a number of Japanese manufacturers were pursuing a high price market strategy in Germany, while Audi, BMW, DaimlerChrysler and Volvo were generally limiting eurozone price differentials to 15 percent.

Phil Evans, principal policy adviser for the Consumers' Association, said the new car price figures confirmed the need for change.

"While the reforms following the damning report from the Competition Commission in the UK have helped to bring new car prices down, there is still a long way to go.

"That is why reform at a European level is so vital, and that is why we are campaigning to end the rules which allow car markers in Europe to price at whatever level that they can get away with."

He added: "The only way to solve this problem is to change the way new cars are distributed and allow both new retailers into the market and existing dealers to have more negotiating power.

But in a statement the European Automobile Manufacturers Association -- whose members include Ford Europe, General Motors Europe AG, and Volkswagen AG -- said that claims distribution arrangements in the industry had led to a high price differential was "manifestly unfounded."

It said that the standard price deviation on the models surveyed was less than nine percent -- and those in the euroland less than seven percent -- comparing favourably to consumer goods as a whole which research showed had a 12 percent standard price differentiation.

The EC survey was carried out by asking 17 European and eight Japanese manufacturers to supply the Commission with the recommended retail price as of May 1 20001 of 81 best-selling models.