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New car price differentials 'substantial', says EC

Price differentials 'still substantial' The latest new car price report produced by the European Commission suggests that price differentials are 'still substantial' from country to country despite the introduction of the Euro.

It found that pre-tax list prices in Spain, Greece, Finland and Denmark, a non-member of the Eurozone, are generally the lowest and that they are the most expensive in Germany, the biggest market, and Austria.

'It is also apparent that prices in the United Kingdom are still much higher than in the Eurozone,' the study added.

'Our monitoring of price differentials confirms that there is significant room for improving market conditions in the motor vehicle sector,' said EC Commissioner Mario Monti. 'The reform proposals presented by the Commission in February should put the internal market into top gear, clearing the road for consumers to benefit from greater competition and increased choice, while reinforcing quality and safety in vehicle repair.'

Although the report is based on information in national car markets in November last year, two months before the introduction of the Euro, it says: 'Since most list prices were no longer denominated in national currency, it would appear that the introduction of Euro had been anticipated.

'Therefore, the report gives a first indication as to the extent to which pricing polices have been adapted in response to monetary integration.'

The Commission said the price differentials 'are based on manufacturers' recommended retail prices net of tax'. It compares prices for 80 models, representing the best selling cars of 24 manufacturers, it added.

It found that in Germany a total of 41 models are sold at the highest prices in the Eurozone and 40 of these were 20% more expensive than in at least one other Eurozone market.

'In fact,' the study added, 'differentials of more than 20% appear as well for 31 models in Austria. The cheapest markets in the Eurozone are Spain, Greece and Finland, with differentials below 20% for more than 90% of the models surveyed.'

The Commission added: 'As in the previous survey, the Commission has found that in the first four segments (A to D), where the high number of models from different competitors would normally lead one to suppose that competition should be strong, the average price differential within the Eurozone is much higher (well above 20%) than in segments E, F and G.'

Taxes have direct effect on prices - says EC

The European Commission report suggests that, across the Eurozone, General Motors (Opel/Vauxhall/Saab), the Fiat group (Fiat, Lancia, Alfa Romeo), PSA Group (Peugeot/Citroen) and the Volkswagen group (Audi/SEAT/Volkswagen) have the widest price differences.

'In particular, the PSA group, the Fiat group, the VW group (Volkswagen and SEAT), Ford, Opel and a number of Japanese manufacturers pursue a high price market strategy in Germany,' the Commission said.

'On the other hand, in general, certain German manufacturers (for example BMW and DaimlerChrysler) and, to a lesser extent, Ford (Ford, Volvo, Land Rover) limit price differentials within the Eurozone to 15% or less,' it added.

It said the generally low pre-tax prices in Finland, Denmark and Greece are largely due to manufacturers' pricing policies.

'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 after-tax prices affordable,' it added.

'However,' the Commission added, 'in other Member States where no such taxes are charged, prices before tax may be 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 manufacturing right-hand drive vehicles, and are affected by the high value of the British pound.'

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