'With prices 16% higher than the average of Europe, average profits per car sold to retail customers are up to five times as high as in other markets,' it said in a new report entitled 'Car Price Convergence'. 'About 10% of the profits of the entire European industry are built on the supermodel pricing level of the UK market. We see significant signs in consumer awareness, Government regulation and competitive conditions to eliminate this price discrepancy.'
The difficulty facing manufacturers is whether price convergence will be driven by currency changes or by tough trading terms which provoke 'an avalanche of incentives as car makers decide that volume is more valuable than trying to protect prices'.
Across the continent, Salomon Smith Barney predicted that expensive markets such as Germany and the UK will see downward pricing pressure, while smaller, cheaper markets such as Spain and the Netherlands will see prices drift upwards.