THE price of new cars across Europe is expected to rise during the last part of the year as manufacturers are under increased pressure to improve their returns, a new report suggests.

The analysis of sales volumes and price movements in the five largest European countries predicts that manufacturers will be able to make larger price increases over the next half-year.

Robin Goodyer, operations director at eurocarprice.com, which carried out the analysis, said: ‘The overall European market is now showing signs of recovery as the declines in German and French sales recede. We expect pre-tax price increases in Germany to rise from their current level of 1.7%.

‘Higher price increases are also expected in the UK, where the market is likely to reach another record level in 2004. Italian market price increases are likely to climb slightly higher and Spanish price increases will remain at a high level while the market there remains strong.’

Goodyer added that France is likely to see the lowest level of car price increases, expected to stay in the 1.6% to 1.8% range.

‘The market still has a long way to climb back to buoyant levels after previous high price increases,’ he said.

On individual countries, the report says:

France: ‘The French market continues to decline, although the rate of decline is slowing. France has the lowest average price rise of the ‘big five’ European markets. This price rise is much lower than reported last quarter and is consistent with our prediction in the previous report that price increases would fall.’

Germany: ‘The German market continues to decline. It was down 1.35% in May 2004 versus the previous 12 months. The average price rise was only 1.66% over the 12-month period. This average price rise is lower than that reported in April and lower than predicted in our last report. It is partly due to Ford and Opel reducing their prices in an attempt to restrict their volume losses.’

UK: ‘The UK market continues to grow year on year. The year’s sales volume to May 2004 is 3.11% ahead of the sales achieved in the previous 12 months. The average price increase across the whole market was 2.06%.’

Italy: ‘The Italian market fell by 1.17% in the 12 months to May 2004. The average price increase for the market was 1.83%. This increase was higher than reported last quarter.’

Spain: ‘Seen very strong growth of 11.46% in sales volume. This strong market environment has encouraged the manufacturers to increase their prices more aggressively than in the other ‘big five’ markets. The average market increase was 3.04%. This is a lower increase than reported last quarter, but is consistent with the prediction of last quarter.’

The report is based on data from JATO Dynamics showing price movements to July 2004 and annual volumes movements to May 2004.

Figures also show the ‘winning and losing’ manufacturers in each country in terms of sales and price movements over the previous 12 months.

Goodyer added: ‘This quarter’s report demonstrates a clear correlation between sales volume movement and price increases. The market with the highest volume growth (Spain) has seen the highest price rise and the market with the highest volume fall (France) has experienced the lowest price rise, with the other three markets falling into the pattern.’

The analysis is published in a report, European Car Market Prices and Volumes, which is available as a free download at www.eurocarprice.com/reports