EUROPEAN Competition Commissioner Mario Monti has pledged to continue to investigate possible restrictive practices that prevent cross-border trade in new cars. His comments followed the latest six-monthly European Commission report on the pre-tax price of new cars across the European Union.

This revealed that average price differentials of about 20% exist between the most popular cars in Europe, and that in extreme cases the price gap can exceed 100%. The Mazda 323, for example, costs €19,060 before tax in the United Kingdom, but only €9,331 in Finland.

Overall, the UK has the highest pre-tax prices for 65 out of the 77 cars in the survey, while Finland has the cheapest pre-tax prices for 52 of the cars.

The European Commission acknowledged that: 'Owing to high car purchase taxes in Denmark, Finland, the Netherlands and Portugal, most manufacturers determine list prices before tax for those countries at a low level, arguing that this is necessary for selling their cars at affordable after-tax prices.'

But Monti emphasised that EU consumers should be free to exploit these pre-tax price differences by buying cars in other member states, and said complaints from residents who encounter obstacles in purchasing cars abroad would be taken into account when the Commission reviews the selective and exclusive car distribution block exemption.

The EC did acknowledge, however, that currency fluctuations between members of the Euro zone and non-Euro countries (Denmark, Greece, Sweden and the UK) account for some of the price divergence.

The Swedish Crown, for example, has appreciated by 11% against the Euro since 1998, while the British Pound has gained 30% against the Euro since 1996. But this led Monti to question why these currency developments and competitive pressures have not led to 'substantial price cuts' from manufacturers importing cars into the UK.

The ACEA (European Automobile Manufacturers' Association) said the latest EC figures demonstrate that 'stable exchange rates and comparable tax levels are a condition sine qua non for real car price convergence in the EU'.

The Association attributed the high car price differentials to Finland's high tax regime and the UK's strong currency, and insisted that 'the persistence of car price differences within the EU is largely due to factors outside the car manufacturers' control.' (August 2000)