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March 3, 2003

BELGIUM: Some convergence on EU car prices, but differentials still substantial – EC

The latest report on car prices released by the European Commission shows that price differentials for new cars are still substantial, although some convergence is taking place, particularly within the euro zone.

By bcusack

The latest report on car prices released by the European Commission shows that price differentials for new cars across the European Union are still substantial, although some convergence is taking place, particularly within the euro zone.

The EC says that the situation as of 1 November 2002 shows that many European consumers can still make significant savings by buying their cars in other Member States and that competition and cross-border trade have not yet brought about significant price convergence. The EC points out that car prices before taxes are the lowest in Denmark, Greece and the Netherlands. Prices in Germany, the biggest market, and Austria, remain among the highest within the euro zone.

The UK remains the most expensive market in the European Union.

This latest report is based on car prices as they stood on 1 November 2002. The price differentials are based on the manufacturers’ recommended retail prices net of tax.

According to the report, divergence among prices is less extreme than that recorded in previous surveys. Standard deviation of prices between national markets fell from 10.6% to 10.1% when compared to the last report of 1 May 2002. This convergence takes place against an overall decline of 0.2% of car prices.

Nonetheless, the EC says that price differentials between the cheapest and the most expensive Member State remain substantial in individual cases and 20% of the recommended selling price for 18% of the car models surveyed in the report.

The widest price difference recorded in the report concerns the Fiat Seicento, whose price in the UK is 59.5% higher than in Spain.

The EC says that a car belonging to the “middle segment” such as the Peugeot 406 in segment D will cost 5,100 euros less in the cheapest Member State as compared to the most expensive Member State within the euro zone. The differential between the cheapest and most expensive Member State amounts to 6,500 euros within the European Union.

The EC says these figures prove that consumers may make a bargain by taking advantage of price differences in the European Union. However, they also show that competition among dealers from different Member States and cross-border purchases are not yet a competitive constraint on manufacturers and that markets remain relatively fragmented.

Within the euro zone, Germany and, to a lesser extent, Austria, remain the most expensive markets. In Germany, a total of 37 models are sold to consumers at the highest prices in the euro zone and 31 of these are between 42% and 20% more expensive than in the cheapest national market within the euro zone. Price differentials of more than 20% appear as well for 19 models in Austria. The number of models with such high price differentials has nonetheless decreased since the previous survey from, respectively 41 in Germany and 23 models in Austria. Cars are the cheapest in Finland, with no differential above 20% for the models surveyed, Greece and The Netherlands with, respectively, three and four differentials above 20%.

The United Kingdom remains the most expensive car market within the Union for a significant proportion of the models examined, despite price decreases in the last six months. UK car prices do include, however, the additional cost of meeting UK specifications, in particular right-hand drive. UK prices are also affected by the £/euro rate fluctuations. The report also shows that for British and Irish consumers buying a car in another Member State, the supplement for right-hand drive specification is generally the lowest for models from Japanese manufacturers (+/-4%), and the highest (+/- 10%) for models produced by the Volkswagen group (VW, Audi and Seat).

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