British motorists still caught in car price rip off

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July 22, 2001 - The Observer

Britain is the most expensive place in Europe to buy a car, with motorists paying up to 60 per cent more, according to the most comprehensive survey on pricing.

A damning report to be made public by the European Commission tomorrow will explode the myth that the problem of car prices in Britain has been resolved and will pile pressure on the Government to take action.

The survey compares the prices of 81 bestselling models produced by the world's 25 largest car companies, and will make sobering reading for Patricia Hewitt, the Trade and Industry Secretary. It found that, as of 1 May, Britain was the most expensive country in the EU to buy a new car for 52 out of the total 81 models considered and that the margin of difference was often staggering, despite repeated warnings from the Commission to the car industry to start treating British consumers fairly. It is likely to influence Mario Monti, the EU's competition commissioner, when he considers shaking up the way cars are sold in Europe later this year.

The report reveals, for example, that a Fiat Marea was on sale in Britain for £9,197 before tax in May compared with a price of £5,583 in Denmark (a difference of 58.3 per cent). In fact, Fiat heads the hall of shame in the UK consistently charging British consumers far more than their continental counterparts for almost every model.

Other manufacturers that stand out are Japan's Mazda (the 323 is almost 56 per cent dearer in the UK), Nissan (the Almera carries a 45 per cent premium in Britain), Vauxhall (the Astra is 53 per cent dearer) and Renault (the Laguna is 41 per cent more). Only the three main German luxury car manufacturers, BMW, Mercedes and Audi, appear willing to offer British consumers their cars at prices anywhere near approaching those on the Continent, with differences as little as 2 per cent.

The report shows that even cars assembled in the UK and made from parts purchased cheaply on the Continent with the strong pound carry a much higher price tag for British consumers. Brussels is expected to say that the situation is all the more difficult to understand because the pound has weakened against the euro in the past six months, a fact which has been largely ignored by manufacturers.

They consistently claim that UK consumers pay more because they are the only motorists in the EU apart from the Irish who require right-hand drive vehicles and because the pound remains, historically, at a high level against the euro.

(does this mean prices will tumble if we join the Euro? Ed.

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20th Feb 2001

CAR manufacturers from all over the world are milking the British consumer, taking advantage of European Union rules to mark up the price of popular vehicles by up to 100 per cent.

The European Commission's latest survey on car prices concluded that there has been no progress in reducing rip-off surcharges in Britain, despite a statutory order last year by Stephen Byers, the Department of Trade and Industry Secretary, aimed at breaking up price rigging by the car manufacturers. The commission found that most European firms are engaging in systematic price-gouging, raking in excess profits in the British market to cross-subsidise a drive for market share in other countries.

The Renault Laguna 1.6 16v sells for £12,252 before tax in Britain, compared with £6,092 before tax in Denmark. Volkswagen was criticised in the report for increasing differentials within the EU market since the commission's last study six months ago. The VW Passat sells for £11,717 in London: £7,616 in Copenhagen

The Japanese also take advantage of the EU's policy protecting monopoly practice by playing much the same game. The Mazda 323 1.5 sells for an average £11,705 before tax in Britain, compared to £5,593 before tax in Denmark. The figures for the Nissan Primera 1.8 5dr are £11,526 and £6,733 respectively.

The price differential for the higher quality German and Swedish cars tends to be far lower. The pre-tax price of the Mercedes E220 is £19,504 in Britain, £17,823 in Germany, and £17,946 in Denmark. The European Consumers' Organisation disputed claims by the car industry that the strong pound and the cost of right-hand drive modifications explain the extreme differences. The group's spokesman in Brussels, Joanna Dober, said: "The arguments don't stack up. It costs the same to make a left-hand drive and a right-hand drive car. It has no bearing on the price at all.

As for sterling, this problem has been going on for years, whether the pound is strong or weak." Dr Roland Stephen, author of Vehicle of Influence: Building a European Car Market, at North Carolina State University, blames the problem on the EU's block exemption which allows car firms to dictate pricing through licensed distributors, distorting the normal competition process and leading to the situation where Europe has three times as many car dealers as America. He said: "It's not a conspiracy: the car manufacturers don't meet secretly in a smoke-filled room to set prices, but there's an unstated practice of live and let live that amounts to a cartel."

The EU's block exemption comes up for review next year. Mario Monti, the European competition commissioner, hinted yesterday that the manufacturers' abuse of the existing system would lead to a much tougher legal framework. Mr Monti vowed to investigate the restrictive practices, saying the commission had received a large number of complaints from British consumers who had encountered difficulties obtaining right-hand drive models from continental dealers.

Denmark has the lowest prices in the European Union because it imposes a car tax of 175 per cent, forcing manufacturers to cut profits to the bone to ensure affordability. The combination of the Danish base price and Britain's low taxes should make Copenhagen the most favoured destination for British bargain hunters willing to go through the hassles of personally importing a new car.