The Block Exemption stipulated that the divergence in new car pre-tax prices should differ by no more than 12% across the European Union.
But figures analysed by Professor Peter Cooke, head of Nottingham Business School's Centre for Automotive Industries Management, show that only 23% of cars within the EU satisfy this criterion.
A further 32% have price differentials of between 12–25%, while one fifth of cars have price differentials between the cheapest and most expensive of 25–40%. In addition, the price of 40% of cars differs by at least 40%. Yet unless manufacturers harmonise their prices at the highest pre-tax price they stand to lose billions of Euros. Three of the four largest new car markets in Europe have pre-tax prices at or above the European average.
Harmonising European prices at Greek levels, for example, would cost the motor industry €37 billion in lost revenue (€200bn–€163bn). Equally, increasing pre-tax prices to UK levels would damage new car sales in key markets like Spain and Italy.
'New car pre-tax prices will harmonise over the next two to three years to within a 10–15% band,' predicted Cooke.
'But it could mean manufacturers stop selling some cars in some markets.'
He added that price harmonisation will not be uniform, but instead be implemented on a segment-by-segment basis, so that pre-tax prices of some cars will increase, while others will fall.
The only long term solution, however, is a standard tax system for new cars throughout Europe, a scenario that Cooke cannot envisage happening for at least 15 years.
He predicted, however, that eventually this common taxation level was likely to add about 23–25% to the pre-tax price of a car, which would represent a significant increase for Europe's largest car markets of France, Germany, Italy and the UK. (August 2000)