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November 3, 2005

UK: Car prices rise faster in third quarter

New car prices in Europe rose more quickly in the third quarter of 2005, according to a survey by PricewaterhouseCoopers and

New car prices in Europe rose more quickly in the third quarter of 2005, according to a survey by PricewaterhouseCoopers and

Average prices at the end of Q3 were 4.4% higher than a year ago (in Q2, the average annual rise was 3.9%).

European new car sales remained flat overall, growing just 0.2% compared to the previous 12 months. With the exception of the buoyant lower medium sector, sales fell in all segments. The largest drop in volume (-10.3%) was in the mini segment, which also saw some of the largest price rises, averaging 6.3%.

“New model launches and facelifts over the past 12 months are driving strong increases in volumes and in turn prices are rising,” said PricewaterhouseCoopers UK Automotive leader Chris Hibbs.

“Within the sini segment the average price is around EUR3,000 lower than in the small segment and margins are generally lower, so setting the right prices at the outset is essential.

“Additionally the production lifetime for a mini segment model can be over 10 years, so it is essential to establish sustainable margins on new models.”

Denmark remained the most expensive new car market in Europe – new car prices there are 92% higher than the eurozone average. The least expensive in Q3 was Switzerland, at 10% below average.

The average UK new car price is now 3.5% higher than a year ago. This is a significant acceleration compared to the previous quarter, when the annual trend was for prices to fall slightly. UK prices remain close to the European average, however.

With overall sales down in the UK, some segments that are still growing are beginning to slow down. This is happening to sales of SUVs and particularly MPVs (minivans). Diesel sales are also slowing, although diesel cars’ share of the market has now reached 34%.

The slowing growth in MPV, SUV and diesel models is also reflected in below-average price increases for these models.

Other markets

The survey found that the overall picture for the “big five” European markets was mixed. Sales volumes rose slightly in Germany and France.

Prices in France increased in line with Europe, but rises in Germany were lower.

Volumes and prices moved up strongly in Spain. Sales in Italy were nearly 5% down year-on-year but Italy is also seeing the largest price increases in Europe.

In Scandinavia, Norway and Denmark experienced the largest Q3 market growth in Europe. The market in Finland fell by over 4% compared to 12 months earlier. Retail prices in these countries, especially Denmark, remained well above the European average due to exceptionally high taxes.

Sales fell in Eastern Europe, particularly in Poland where the market is now down over 30% year-on-year. Price increases were also below average in these markets.

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