COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 10.07.1996 
COM(96) 327 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
EUROPEAN 
AUTOMOBILE INDUSTRY 
1996 

1996 Communication on the Automobile Industry 
Page 
1. The Development of Markets and Production 2 
1.1 The Global Context 2 
1.2 Market developments in the EU 4 
1.2.1 The market for passenger cars and LCVs 
1.2.2 The automotive components market 
2. Competitiveness 5 
2.1 The influence of the business environment 5 
Unit labour cost 
Energy costs 
Cost of capital 
Currency fluctuations 
Benchmarking the business environment: the overall picture 
2.2 Increasing competitiveness: Measures taken by industry 7 
Capital investment 
Productivity 
Quality 
R&D spending 
2.3 Results of restructuring 9 
Employment 
Profits 
European performance on major world markets / Trade balance 
3. The European Union's Strategy 10 
3.1 Promoting intangible investment 10 
R&D 
Training 
3.2 Ensuring strong and fair competition 12 
State aids 
Vehicle Distribution 
Foreign Trade 
3.3 Developing industrial co-operation 15 
Internally 
Externally 
3.4 Modernising the role of public authorities and 
creating a stable and beneficial business environment * 16 
3.4.1 Ongoing initiatives to complete the Internal Market 16 
Type-approval 
Car price differentials 
Taxation differences 
Safety issues 
Environmental issues 
Transport policy 
3.4.2 Orientations for the future 19 
Improved co-ordination of regulatory policies 
The high level panel 
4. Summary 22 
COM96EN6 DOC, 9 July. 1996 
Introduction 
On the basis of the Commission's last Communication on the automobile industry of February 
19941, the Council adopted a Resolution on the automobile industry in May 19942. In it, the 
Council requested the Commission to report on the industry's structural adjustment and on the 
progress achieved in implementing this Resolution. The discussion was then taken up by the 
European Parliament3 and the Economic and Social Committee4, who both adopted resolutions 
on the industry. The following document has been prepared by the Commission in order to 
respond to the Council's request and to the proposals originating from the discussions that 
followed in the Parliament and the Economic and Social Committee. 
I. The Development of Markets and Production 
1.1 The Global Context 
World automobile production (cars and light commercial vehicles less than 5 tonnes) is 
estimated to have reached 47.7 million units in 1995 an increase of 0.8 million units over 1994. 
Production in the Union accounted for about 29% of the total, an increase of two percentage 
points compared to the 1994/93 average. US automobile producers accounted for 24% and 
Japanese producers 21% of this total compared to 25% for US and 23% for Japanese production 
in 1994/93. Automobile production in the most important new manufacturing countries-* reached 
a total of 7 million units in 1995, 15% of the total world production. Of this South Korea 
represented 35%, reflecting an ambitious programme to transform the South Korean car 
industry, which is already the world's sixth biggest, into the fourth largest by the year 2000. 
The globalisation of the world automobile industry is now proceeding at a very fast pace and is 
affecting progressively all the corporate activities of European manufacturers and suppliers. 
Reflecting the change in the location of future growth virtually all European manufacturers have 
now adopted global strategies consisting of achieving a world wide sales and production base 
spread around traditional and newly emerging growth markets. West European producers' 
production of vehicles outside the EU represents today 20% of total "European" production. 
This percentage is expected to increase in the future reflecting faster growth outside Europe and 
possibly some production relocation. The USA and the growth markets of Asia and Latin 
America have attracted investments by EU manufacturers in recent years.6 
Sourcing and investments are to some extent being relocated from relatively high cost locations 
within the EU to low cost locations inside or outside the Union, notably to Central and Eastern 
Europe. From the EU automotive industry's point of view, the opening of the East represents 
both an opportunity and a challenge: » 
>COM(94)49 final 
2OJ94/C149/01 
3PE211.149/fin. 
4CES 1071/94 
5Argentina, Mexico, Brazil, Korea, India, Thailand, Taiwan, China 
6To cite some examples: 
- Mercedes Benz and BMW have invested in production sites in the United States; 
- China has been selected as a production location by PSA/Citroen and Volkswagen/Audi, with 
others trying to follow suit; 
- Fiat, Ford, GM, Mercedes-Benz,, Peugeot and Rover have entered into joint Ventures with 
Indian partners for the production/assembly of cars; BMW and Volkswagen are about to do 
so; 
important new investments have been announced in Brazil where European manufacturers 
have traditionally had a strong presence: Fiat, Ford, GM, Mercedes, Renault and Volkswagen 
have announced further investments by the year 2000. 
COM96EN3DOC, 9 July, 1996 
• 3 
• An opportunity, as the Central and Eastern European countries, with their growth potential 
for vehicle sales and a good level of technical qualification and relatively low labour costs, 
offer favourable prospects for exports and attractive conditions for local 
assembly/production. Many EU manufacturers (Fiat, Ford, GM/Opel, Renault, Rover and 
Volkswagen) have already taken the opportunity and established joint ventures with 
Central/Eastern European partners or invested in greenfield production. 
• A challenge, because, following the building-up of production capacity in Central/Eastern 
Europe by their competitors from Korea and Japan (notably Daewoo in Poland, Romania and 
the Czech Republic, Suzuki in Hungary) EU manufacturers will face increasing competition 
on their home market at a time when growth prospects on this market are limited and the 
industry is undergoing major restructuring. 
A relocation of some production to Central and Eastern Europe will have a direct impact on 
employment. On the other hand, investments aimed at exploiting new markets and regions can 
help to support the European employment base, e.g. through an improved spreading of currency 
risks and increased demand for automotive parts that have been produced in the EU. This point 
of view has also been accepted and put forward by the responsible trade union representation at 
European level, the European Metal Workers Association. 
In terms of market size the combined US, EU and Japanese markets still represent more than 
70% of world sales. Encouragingly, European producers have improved their performance on all 
three of these markets in the last two years7. However, major future growth opportunities will 
come not from the traditional markets of Western Europe, USA and Japan which are tending to 
level off, but in new growth areas notably China, South East Asia, India, Latin America and 
Eastern Europe. The European market is therefore not sufficient to ensure long term viability. 
This does not mean of course that European sales are of secondary importance; on the contrary 
most European companies will continue to rely on the European single market as underpinning 
their entire operations and as a basis for expansion. 
Graph 1 of the annex shows the worlds' major automobile manufacturers by production output. 
Compared to the situation ten years ago, some companies that would have featured on a similar 
chart made then, like Jaguar, Rover and Saab, have not succeeded in remaining independently 
competitive with their relatively low production levels. In April 1996, Ford of the USA has 
taken the control of the Japanese car manufacturer Mazda, indicating that this trend is continuing 
and that the formerly closed Japanese economy is now becoming more open not only for imports 
of foreign cars but also for foreign direct investment. In the meantime, South Korean companies 
have emerged and built up considerable capacities. Furthermore, the major South Korean 
manufacturers have announced plans to increase production to over 5m units per annum by the 
end of the century. While much of this increased production will be targeted at Asian Pacific 
markets it can be expected to contribute to an intensification of competitive pressure in Europe. 
In Europe, pressures for co-operative ventures and collaboration are increasingly hging felt. 
Many of Europe's manufacturers have entered into joint venture production agreements, e.g. the 
Ford/VW and Fiat/PSA MPV (multi purpose vehicle) projects. The Volvo/Mitsubishi 
arrangement to produce two different car models on the same production line in the Netherlands 
is especially significant because it will produce one of Volvo's core models, rather than the niche 
models that have typically been the result of other manufacturers' joint ventures. At the same 
time, the Japanese transplants have become more integrated into the European economy by 
extending their European supplier base and raising local content levels. 
Capacity utilisation in Europe was below 80%) for most of the European high volume 
manufacturers in 1993 and has not risen above this critical level since8. The existing structural 
overcapacity needs to be seen in the context of the successful policy of manufacturers to reduce 
7see chapter on competitiveness 
8Capacity utilisation = Units produced per annum / Maximum capacity in units per annum 
(based on the number of shifts that can be worked on a plant by plant basis) 
COM96EN3.DOC, 9 July, 1996 
4 
their break-even point, thereby enabling them to make profits at historically low levels of 
capacity utilisation and to respond to market evolutions. 
Prompted by increasing competition in the European market and the recent crisis in demand, 
there have been some decisive changes. New greenfield projects such as the Fiat plant in Melfi, 
the Opel plant in Eisenach, the Seat plant at Martorell and the VW/Ford joint venture in 
Setubal/Portugal are now fully operational, increasing hereby the overall capacity in Europe and 
setting new standards in efficiency and productivity for the respective enterprises. Additional 
capacities in the Community from Japanese and European car manufacturers will also come on 
stream during the next years. There have been reports that Daewoo is seeking to make the first 
significant inward investment by a Korean firm in the sector. Daewoo has also started a large 
scale investment programme in Eastern Europe (Poland, Romania, Czech Republic). The 
capacity expansion by major European manufacturers in Eastern Europe will also have an 
impact on the Community market, into which these products have relatively free access. On 
balance, it is improbable that capacity utilisation of European manufacturers will improve for the 
rest of the decade, making it essential therefore that manufacturers reduce costs and further 
increase the flexibility of their manufacturing operations. 
1.2 Market developments in the European Union 
1.2.1 The market for passenger cars and LCVs" 
Since the last Communication on the European Automobile Industry was published in February 
1994, the number of new car and light commercial vehicle (LCV) registrations'0 has recovered 
slowly but steadily from the 1993 downturn**. In 1994, 12.8 million new cars and LCVs were 
sold in the 15 Member States, marking an increase of 6.1% compared to the previous year. 1995 
saw a rather disappointing increase in demand of just 0.6%, mainly due to increasing car costs 
and a reduction of GDP and household income growth. For 1996, the European market is 
expected to grow by about 3% (some manufacturers predict even lower growth figures); if 
confirmed this would mean that over the period 1994-1996 less than half of the 16% fall in the 
market in 1993 would have been recovered. 
The development of new passenger car registrations during 1994 and 1995 varied widely from 
Member State to Member State. Of the large car markets, sales in France and Spain have shown 
the greatest fluctuations, in part due to the expiry of scrappage premiums which stimulated the 
market in 1994. 
While European brands advanced to a 1995 market share of 84.6%) compared to 83.6%) in 1993, 
Japanese brands lost 1.6 percentage points from 12.5%) to 10.9% (including transplant built 
cars) 12. The substitution of imported Japanese brand cars by those locally produced has gained 
further momentum under the pressure of the rising Yen: imports from Japan were reduced by 
16.6%) in 1994 and 7.6%> in 1995 while the sales of Japanese brand cars made in Europe 
increased by 21.3% in 1994 and 7.7%) in 1995. The penetration of the market by Korean brands 
has increased rapidly, sales ^ have increased by no less than 59%) in 1995 (24% in 1994) to 
reach 180,000 units, about 1.4% of the European Union market. 
1.2.2 The automotive components market 
The situation of the European automotive component suppliers has improved again. In 1993 
demand in the EU contracted by 8%, followed by an increase of 14% in 1994^ . The year 1995 
should have seen a further improvement. Up to the year 1998 annual growth in demand in 
9LCVs = light commercial vehicles with less than 5 tonnes 
10Sources: AAA, DRI McGraw Hill, JAMA, LMC Automotive Services, Marketing Systems 
11 (the number of registrations decreased by almost 16% in 1993 to 11.5 million units compared to 14.0 
million in 1992) 
12more details: see table (annex) 
13Cars plus light commercial vehicles 
14 Figures derived from DEBA (NACE 3530) unless specified otherwise. 
COM96EN3 DOC. 9 July, 1996 
5 
Western Europe is expected to be around 7% with especially good prospects for automotive 
electronics systems^. More than 10%> annual growth is foreseen until the year 2000 for this 
segment, with the biggest growth forecast in systems which give information to the driver. 
One of the main trends in the industry is towards system or modular supply, which involves the 
transfer of responsibility for research & development as well as production of a complete (sub) 
system to the supplier. This is generally combined with high levels of outsourcing which, for 
new models is often between 65% and 75%) of the ex-factory value, as well as single or dual 
sourcing. This trend inevitably leads to a reduction in the total number of direct or first tier 
suppliers. The number has already dropped from an estimated 10,000 direct suppliers in Europe 
in the early 1970s to approximately 3,000 at present and is expected to fall further to 
approximately 500 by the year 2000*°. As regards the main car manufacturers in Europe, the 
average number of parts and systems suppliers per vehicle manufacturer dropped from 1,370 to 
1,220 between 1990 and 1994* '. At the level of individual manufacturers, the reduction of the 
number of direct suppliers ranged from none to almost 50%. 
Internationalisation and globalisation is also impacting the automotive components sector. This 
represents both a threat in the form of increased competition, illustrated by heavy recent 
investment in the EU by US automotive suppliers, and an opportunity in the form of increased 
business opportunities in foreign markets, especially for first-tier suppliers. In view of the 
challenges of a global automobile industry first tier suppliers will have to become increasingly 
international in order to provide for assemblers' manufacturing requirements world-wide. 
Combined with the trend towards systems supply, this can be expected to lead to more 
international mergers, take-overs and strategic alliances in the supply industry as firms seek to 
strategically strengthen their world-wide supply capacity and their ability to supply the 
necessary technology and products to manufacturers. 
It is obvious that the trend towards system supply and globalisation presents major challenges 
for second and third tier suppliers, especially for SMEs. For these companies the main 
consequence will be increased pressure to reduce costs, yet it is here that the concepts of lean 
production, total quality and continuous improvement have made the least headway. 
2. Competitiveness 
2.1 The influence of the business environment 
Industrial competitiveness depends primarily on how firms are managed and organised 
internally, but it is equally evident that the business environment within which the companies 
operate also plays a crucial role in assuring the maintenance of high value added industry in 
Europe. 
Unit labour costs 
It is the responsibility of the social partners to ensure that unit labour costs for building vehicles 
in Europe are internationally competitive, the more so as wage costs account for about 70% of 
all production costs of a motor vehicle across the entire value-added chain. The situation in 
Europe varies substantially from country to country.'° While total labour costs are significantly 
higher in Germany than in any other major manufacturing location in Europe or elsewhere and 
the number of hours worked less, higher productivity in this country to some extent makes up for 
these higher costs. Overall, it has to be said that on average unit labour costs are higher in all 
European countries compared to the main competitors in Japan and the US. Clearly further 
improvements have to be made to close this gap. In this context the Commission welcomes 
15 Freedonia Group and Economist Intelligence Unit, 1995 
16 Auto Forum in Stuttgart, 1995 
17 Commission industry survey, 1995 
18See table 4 of the statistical annex 
COM96EN3 DOC, 9 July, 1996 
6 
initiatives by the social partners to develop more flexible worktime models in order to make 
better use of production equipment and to take shifts in demand into account. 
Energy costs 
Energy represent a primary input of all manufacturing industries. While prices on the gas market 
have converged across Europe, at a level close to that of the United States, electricity prices have 
not. High costs for electricity affect European producers. Compared to lower US prices, the EU 
automotive industry is suffering from a 25%) costs disadvantage. Competition is very limited in 
the European electricity market, as markets are highly imperfect, and in the majority of cases 
closed to competition. Preliminary studies on the impact of the Single Energy Market have 
estimated a potential reduction of electricity prices of 8%> in the EU. This amounts to ECU 5.8bn 
per annum, and covers only direct price reductions arising from increased competition. The 
recent agreement in the Energy Council on opening the European electricity market will have a 
positive effect on reducing costs. 
Cost of capital 
The cost of capital is usually measured in terms of the cost of debt and equity. Although it is 
very difficult to quantify to what extent the cost of capital has influenced the performance of the 
European automotive industry, it is possible to identify economic policies that should be pursued 
to lower the cost of capital. In the 1990s, the average measured long-term real interest rate in the 
EUR15 has been slightly higher than in Japan and in the United States. Regulatory and market 
access restrictions that increase the cost of using certain financial instruments in Europe could be 
modified. Some of these instruments are cheaper and very successful in other parts of the world. 
Inflation risk premia can also be important, which underlines the importance of the budgetary 
policies that are currently being pursued by Member State government in order to meet the 
Maastricht criteria. 
The cost of equity for many of Europe's listed companies is also higher than it needs to be. 
Differing accounting standards, a lack of knowledge about shareholders rights in certain 
Member States and less stringent reporting requirements internationally, artificially raise the 
cost of equity for European companies. The Union therefore actively promotes the development 
of reputable and widely recognised reporting standards via the International Accounting 
Standards Committee (IASC). 
Currency fluctuations 
While the appreciation of the Yen has helped European industry to compete on world and 
domestic markets, currency fluctuations between Member State currencies have significantly 
affected the financial performance of European automobile manufacturers. As has been 
described by the Commission in the Communication on the impact of monetary fluctuations on 
the Internal Market (COM95/503 final), during the last period of currency instability, 
automobile manufacturers exporting from countries with an appreciating currency faw their 
profit margins and exports to Member States with a depreciating currency reduced. On the other 
hand, companies exporting from Member States with depreciating currencies (Italy, UK, Spain), 
although unable to capture a significantly larger share of the EU automobile market, nonetheless 
saw their profit margins increase. 
In order to abolish the distortions created by these monetary fluctuations (e.g. heterogenous 
pricing policies, déstabilisation of the distribution network especially in the case of dealers 
located near frontiers, distorted location and sourcing decisions by automotive companies), it is 
important for the competitiveness of European industry that the Union adopts a single currency 
within the time-scale provided for in the Treaty (on 1 January 1999). This step, combined with 
the measures that will be taken to ensure economic convergence and monetary stability both 
within the EURO Zone and between the EURO and the other European currencies, will help to 
reduce uncertainty, transaction costs and to improve the functioning of the Internal Market. 
Furthermore, it will also help the EU automotive industry to improve its competitiveness. 
COM96EN3 DOC. 9 July, 1996 
7 
Benchmarking Europe's business environment: the overall picture 
Research conducted for the Commission on how Europe's business environment in the 
automobile sector compares with those of its major competitors shows that there are significant 
variations among the countries selected for review (USA, Japan, South Korea, Poland, Italy, 
France, Germany and the UK). In a first step, the countries were benchmarked on absolute 
criteria (e.g. availability of skilled labour, infrastructure etc.). Here, the EU-4 countries showed a 
number of strengths leading to the statement that the European business environment for motor 
vehicle manufacturing investment can be regarded as generally positive. The main strengths and 
weaknesses are: 
European Strengths 
O general economic performance 
(also true for USA, Japan, Korea) 
O protection of intellectual property 
(legally also provided for in Poland) 
O excellent transport infrastructure 
(also offered by the USA, Japan, Korea) 
O skilled labour availability 
(also valid for Korea, Japan) European Weaknesses 
• time to obtain building, operating 
and environmental permits 
(much shorter in the USA, Japan, Korea) 
• high corporate income tax rates 
(much lower in the USA, Korea) 
• high labour cost 
(the prime advantage for Korea, Poland) 
• lack of work time flexibility 
(advantage for the USA, Japan, Korea) 
The transformation of these strengths and weaknesses into monetary terms, that is being 
performed in the second part of the study, shows that there are apparent weaknesses on the 
European side. 
The assessment is is based on the calculation of the Net Present Value of an investment (the 
establishing of the same, state-of-the-art, lean and efficient car plant) in all the different business 
environments mentioned above. Under given assumptions the results showed that the most 
profitable location to set up car production would be South Korea, due to a very positive relation 
between cost and qualitative aspects (infrastructure, administrative efficiency). According to the 
study, good Net Present Values for the amount of money invested could also be expected in the 
UK, Poland, and France, whilst other European countries and Japan would be in a less 
favourable position.19 
In order to constantly measure the competitiveness of European industry and to compare it to its 
international counterparts, the Commission is also developing a specific data base in co­
operation with EUROSTAT. It covers most OECD countries and contains a wide range of 
indicators relating to different aspects of competitiveness (e.g. trade balances, market shares, 
profitability, labour costs, price indices, research and development spending). 
2.2 Increasing competitiveness: Measures taken by industry 
Capital Investment 
Capital investment of the European automobile industry20 has risen from ECU 10.8bn in 1989 to 
a peak of ECU 15.0bn in 1992, after which - under the influence of falling sales figures - capital 
investment was cut to ECU 11.8bn in 1993 and 11.7bn in 1994. The last figure is just 8% higher 
than the 1989 level, and signifies a decrease if inflation is taken into account. Since the industry 
has recovered since 1993, capital investment is expected to rise again in the years following 
1995. Capital investment as a percentage of turnover is relatively high in Europe. In 1994, 
European car makers spend over 6% of their turnover on capital investment, similar to their 
competitors in the USA and compared to around 4% for the Japanese firms. 
19see graph 2 
20excluding GM Europe for whom no figures were available 
C0M96EN3.DOC, 9 July, 1996 
Productivity 
With regard to productivity, a core element of competitiveness, the last two years have seen 
further progress made by the European automobile industry.21 Research shows that European 
plants have made the greatest percentage improvement in productivity worldwide over the last 
five years. But plants in North America and South Korea have also considerably improved their 
productivity. Given the smaller improvement in the performance of Japanese owned assembly 
plants in Japan, the average performance gap between European and Japanese plants has slightly 
narrowed, although a large gap still remains. Many European plants still have a long way to go 
to achieve world class performance in productivity although the best European plants are among 
the best in the world. Overall, European plants have made an improvement of nearly 30%> in 
productivity, dropping the number of hours to produce a vehicle from 36.9 to 25.3. The 
European owned plants in Europe are somewhat weaker performers having an average 
productivity of 27.1 hours per vehicle, which is roughly 10%> worse than the average of US or 
Japanese owned plants in Europe.22 
Plants in the industrialising countries (e.g. Korea, Brazil and Mexico) showed almost as great an 
improvement as the European plants, and at 29.7 hours per vehicle are only four or five hours 
behind the average European plant. The US owned (i.e. Big Three) plants in North "America 
improved their productivity from 24.9 to 21.7 hours per vehicle. In comparison, Japanese owned 
plants in Japan showed a minimal change in productivity over this period, from 16.8 to 16.2 
hours per vehicle. However, Japanese plants in North America improved their productivity by 
18.7%) and are quickly approaching the performance levels of their Japanese counterparts. 
Quality 
Quality trends23 are similar in many ways to those for productivity. The data used stems from an 
Initial Quality Survey^ conducted annually in the USA and has been adjusted to reflect only 
defects that are directly related to assembly plants. The dominant trend is clearly convergence 
towards quality levels in the range of 60 defects per 100 vehicles, with the exception of the 
group of plants from the newly industrialising countries whose quality worsened over the survey 
period. The greatest improvement is again shown by European plants^. The quality of the 
products of the industrialising countries group has slightly deteriorated between 1989 and 
1993/4, which, is primarily attributable to a period of labour conflict in the Korean industry and 
an explosion of Korean domestic demand which has placed a premium on high volume 
production. Korean auto makers are already showing signs of returning to more competitive 
levels of quality, although they still lag behind the other regional groupings. 
Research & development spending 
The European Automobile industry (excluding suppliers) has increased R&D expenditure from 
ECU 6.2bn in 1989 to ECU 8.3bn in 1994. Even during the economic downturn in 1993, high* 
R&D spending has been maintained. R&D expenditure has resulted in some very successful 
innovations of motor vehicle technology, e.g. airbags and ABS, which were first developed in 
Europe and are now being used world-wide. Weaknesses remain, however, notably concerning 
the ability to transform R&D results into successful products. 
2'Source: International Motor Vehicle Programme (IMVP) of the MIT 
22For confidentiality reasons, all groupings are comprised of at least four plants from at least three 
different companies. For this reason, it is not possible to distinguish the Japanese from the US producers in 
Europe. 
23Source: International Motor Vehicle Programme (IMVP) of the MIT 
^^The Initial Quality survey (IQS) is based on a random sample of new car purchasers in the USA who 
were asked to fill in a detailed questionnaire about their vehicle after approximately four months of use. 
25This only includes plants selling vehicles in the US 
C0M96EN3.DOC, 9 July, 1996 
2.3 Results of restructuring 
Employment 
Direct employment in the automobile sector in Europe26 as measured by EUROSTAT in its 
NACE 3500 category (Motor Vehicles and Parts) has decreased from 2.2 million in 1980 to 1.6 
million in 1994. This is a reduction of almost 30%> of the workforce. Since there is considerable 
competitive pressure on the industry to reduce costs, further reduction is to be expected. 
Employment in motor vehicle manufacturing alone has gone down from 960,000 in 1993 to 
921,800 in 1994. For 1995, reductions to 912,000 have been announced.^? Employment in the 
European automobile components sector contracted by 8%> in 1993 and by 5% in 1994, 
indicating a downward trend which is significantly less severe than predicted by the widely 
quoted Boston Consulting Group study of 1993. 
Looking at total employment in the sector (NACE 3500) on a Member State level, the trend of 
workforce reduction is evident in all major car producing countries.28 The temporary exception 
to the rule is Germany, were employment in the automotive sector had been increasing from 
1980 until 1989. After German reunification, employment figures have first risen abruptly, 
taking account of additional Eastern demand and the additional workforce. Since 1991, 
employment has gone down more steeply than in other EU Member States. Figures for 1994, 
including the Neue Lander (former GDR), are well below the number of employees in 1980. 
Realistically, the automotive sector can no longer be regarded as a sector of employment growth. 
But new production concepts incorporating elements of lean production, continuous 
improvement, total quality management, teamwork and outsourcing must not necessarily lead to 
less employment than traditional ones. Companies employing creative work time models, e.g. 
VW at its Wolfsburg site, have managed to keep their staff employed even in times of crisis. 
Tasks requiring know how are more likely to continue to be carried out in the traditional 
locations than tasks that can be transferred more easily. There is also increasing evidence that 
some past automation investments could have been used more profitably if they had been spent 
on human resources development. While state-of-the-art production technology is vital to ensure 
the future of the industry, the focus of attention is now shifting increasingly towards the 
employees, whose interest in more stimulating tasks, higher qualifications and a positive work 
environment should be addressed to achieve higher levels of flexibility, productivity and quality. 
The dialogue between the social partners at plant, national and European level has an important 
role to play in this context. 
Profits 
Following declines in profits over the previous three years, European automotive firms incurred 
net losses of a total of ECU 2.5bn29 jn 1993. The impact of the recession on profitability has 
been less than that felt, for example, by US manufacturers in 1990 to 1992, due to the fact that 
European automotive manufacturers have managed to lower their break even point. In 1994, the 
revenue of European car producers increased by 10% and the industry returned to positive 
results with an aggregated net profit of ECU 5.7bn, which will probably be maintained, but not 
largely extended, in 1995. The benefits of recent cost reduction strategies should be felt more 
fully in future years, but scope remains for further consolidation of the industry. 
26Taking upstream, downstream and related activities into account, up to ten jobs in Europe are dependant 
on each job in the automotive industry. This demonstrates that the automobile industry is of crucial 
importance for the European economy. 
27Figures based on a survey carried out by the Commission recently 
28See statistical annex 
28COM (93)700 final 
29Source: European Automotive Research Ltd., 1995 
COM96EN3 DOC, 9 July, 1996 
10 
European performance on major world markets 
The performance of automotive firms on major world markets can also be regarded as an 
indicator for the competitiveness of the industry. In Japan, European producers have improved 
their performance markedly in the last two years and now account for about 5% of the domestic 
new passenger car market.™ US producers and cars imported from Japanese transplants in the 
US now account for about 2% of the Japanese passenger car market. The improved performance 
of European imports, is a reflection of European capacity to satisfy consumers' demand not met 
adequately by other competitors, as well as improved quality and price of European products 
relative to their Japanese domestic counterparts. Further progress in removing barriers to trade 
on this market, notably in removing regulatory obstacles to trade which have negatively affected 
the transactional costs of doing business in this country has also been an important contributing 
factor. 
In the US a number of European producers have also prospered. The market share of European 
producers on the US passenger car market has increased from 3.6%) in 1993 to 4.3%o in 1994 to 
5.2%o in 1995. As in the case of Japan it has been upmarket models which have formed the bulk 
of European sales on the US market. 
Reflecting these developments EU trade with Extra-EU countries has increased significantly and 
in 1994 the EU had an automotive trade surplus of 20 billion ECU with the rest of the world. 
The bulk of the surplus comes from vehicle sales; parts and accessories contribute an annual 
surplus of 3 billion to the total. 
3. The European Union's Strategy 
The achievement of competitiveness on a global scale is primarily the responsibility of industry 
itself. As the chapter above has shown, significant steps in this direction have been undertaken 
by the European automobile industry already. The public authorities, however, have a key role to 
play in creating a favourable business environment within which the industry can prosper, since 
high value added employment in the long run can only be sustained by a competitive industry. 
The elements of this strategy have been described in the recent Commission Communication on 
an industrial competitiveness policy for the European Union-*! as promoting intangible 
investment, notably R&D and training, ensuring strong competition, developing industrial co­
operation and modernising the role of public authorities. 
3.1 Promoting intangible investment 
3.1.1 R&D: The future of the car and the "Car of tomorrow" 
In the last Communication on the European Union automobile industry, the Commission called 
on the industry to develop "clean, lean-produced, intelligent, quality, value" cars for" the year 
2000 and beyond. In the meantime, the Commission has set up the Task Force on the "Car of 
tomorrow" an initiative designed to better co-ordinate and focus research activities in the area of 
the ultra low and zero emission cars of the future and the associated infrastructure for road 
telematics, refuelling and recharging. This initiative also serves to assure regulatory stability 
and coherence through better co-ordination and planning of research activities with regulatory 
policy. While the key bottleneck preventing the commercialisation of such low emission 
vehicles has been identified as the propulsion system, the choice of technologies necessary to 
ensure that the industrial and environmental objectives identified by the Task Force are met has 
not been predecided. It is rather up to industry, acting from the "bottom up", to bring forward 
joint research proposals which respond to their concepts of which technologies, within the range 
of promising technologies identified by the Task Force, are most likely to offer the best 
303% on the car and LCV market 
31 COM(94)319 final 
COM96EN3.DOC, 9 July, 1996 
11 
prospects of long term commercialisation.32 The Commission has asked the Council to_fund this 
new research initiative with a budgetary allocation of ECU 130 million in the context of its 
proposal for supplementary funding of the Fourth framework Programme. The activities of the 
Task Force will also contribute to the setting of priorities for research under the Fifth Framework 
Programme, on which discussion should start in 1996. 
The optimisation of "Car of tomorrow" concepts and the development of low emission 
technologies is a necessary but not sufficient condition to guarantee the place of the car in the 
future transport system. Complementary to the Task Force activities, significant efforts have 
been made by Commission research programmes to support the R&D needs of the automobile 
industry as they are expressed in the Master Plan for research and technological development of 
EUCAR, the Industry's Council for Automotive R&D33. For example, the Industrial and 
Materials Technologies (BRITE/EURAM III) programme has supported more than 30 specific 
projects34 with funding exceeding ECU 63.5 million for key technology areas, leading to 
advanced production systems and vehicles addressing the challenges of globalisation, 
competitiveness, environmental problems and the need to support sustainable mobility. 
The Commission therefore also supports the inclusion of the car in a multimodal traffic system 
in an intelligent way. This is shown by the fact that the Commission has set up a Task Force on 
"Multimodality" in parallel with the Task Force on the "Car of tomorrow", as well as by the 
latest Communication of the Commission on the "Citizens' network / Fulfilling the potential of 
public passenger transport in Europe".35 
As purveyors of efficient and cost-effective mobility it is evident that car manufacturers also 
have a vital interest to ensure that the system of traffic and transport as a whole is optimised. 
This means giving continuing emphasis also to joint R&D programmes designed for the further 
development of Transport Telematics and Information Technology projects under programmes 
such as the Telematics Applications Programme, Advanced Transport Telematics, ESPRIT36 and 
other Union programmes. 
3.1.2 Training: Human resources policy / utilising the Structural Funds 
Immaterial investment, notably vocational training, is now widely recognised as playing a 
decisive role in achieving* greater competitiveness in European industry. At the same time, 
education and training not only provide European citizens with the skills they need to participate 
efficiently in the labour market, but also contribute to their personal development and enable 
them to become more mobile within the single market. 
The Commission is contributing to Member States' efforts through Objective 4 of the European 
Structural Funds, which is aimed principally at training and retraining workers threatened by 
unemployment, and through the accompanying ADAPT initiative. 
Building on the FORCE, EUROTECNET, PETRA, COMETT and LINGUA programmes, the 
new LEONARDO DA VINCI vocational training programme covers the period 1 January 1995 
to 31 December 1999. It was set up with the objective of becoming a "European laboratory of 
innovation" in the field of vocational training. Previous programmes have already contributed to 
32At the 2nd Forum on the European Motor Vehicle Industry, that was held in Stuttgart on 5/6 October 
1995 as a joint European Commission / European Parliament conference, representatives of industry, 
Commission and Parliament have underlined that it is essential for the acceptance of the Task Force that its 
work is not restricted to certain propulsion systems 
33EUCAR - European Council for Automotive R&D, Master Plan, 6 June 1994 
34IMT (BRITE/EURAM III) projects notably cover: advanced de3ign and manufacturing technologies, 
advanced thermal engines, emission reduction technologies, electric and hybrid vehicles concepts, 
advanced vehicle components and vehicle control technologies for active safety 
j5COM (95) 601 / see chapter on transport policy 
36ESPRIT projects notably concern: Technologies for Components and Subsystems, High Performance 
Computing, Networking and Integration in Manufacturing, the Open Microprocessor Initiative. 
C0M96EN3D0C, 9 July, 1996 
12 
the design of innovative and transnational training material for the automotive industry and 
LEONARDO will build upon this experience. The automobile industry, having always been a 
leading sector regarding the development and implementation of new forms of organisation and 
production systems (e.g. lean production), is also setting standards when it comes to training and 
retraining. For this reason, in the last Communication on the European Union Automobile 
Industry of February 1994, the European Commission announced its intention to create a 
transnational training network for the automotive industry within the framework of the FORCE 
programme. 
This temporary network resulted in the definition of 53 model projects under three headings: 
- Training for new work structures 
- Training for co-makership (Manufacturer /Supplier relations) 
- Learning while working / on-the-job training 
Precisely because the number of companies undertaking increased training and organisational 
development initiatives is continually increasing, and the trend is now towards an industry with 
better trained employees rather than more and more automatisation, there appear?' to be a 
growing need for the exchange of information, experience, and training material. It is hoped that 
the European network of training projects, that is now being developed by the automotive 
industry associations ACEA and CLEPA as a follow-up to the initiative described above, can 
serve as a clearing house for the exchange of information and as the starting point for common 
training approaches of the industry. 
3.2 Ensuring strong and fair competition 
Ensuring that strong competition prevails in the Union's market is an essential plank of industrial 
policy applied in this sector. Three main aspects of that policy need to be highlighted:-
State Aid 
The Commission has continued to apply the Framework on State Aid in the motor vehicle 
industry which was reintroduced in January 1996 and remains valid until end 1997. This 
framework ensures that aid granted on the basis of approved aid schemes to projects at a cost of 
more than 17 MECU are notified and that they are examined to ensure coherence with the 
Framework. Most large scale state support in this sector is given in the form of regional aids 
which are subject to a particular examination aimed at identifying if the aid is in proportion to 
the regional and structural handicaps incurred by new investments compared to costs that would 
have been incurred in a more central zone in the Union. This methodology has served the 
Commission well in the past and has ensured that investments with state aids have been 
examined on a comparable and fair basis which weighs up regional policy considerations against 
the risk of distortions in competition resulting from state aids, it is acknowledged that the 
Framework also has its limitations. In this context it should be noted that the cdSt-benefit 
analysis undertaken are very detailed exercises dependent on the verification of company data by 
independent outside consultants based in part on forecast and estimation. The Commission has 
recently tested the possibility of introducing a horizontal framework by which regional aid to 
large investment projects in any industry is assessed according to a uniform set of transparent, 
simple and predictable criteria. Given the mixed reactions of Member States to the 
Commission's subsequent proposals for such a horizontal system, it is uncertain whether the 
Commission will adopt such an intersectoral framework which might replace the different 
sectoral frameworks that currently exist. In any case, the Commission has planned a review of 
the motor vehicle framework later this year and, to that effect, demanded an independent study 
on the effectiveness of the framework and on possible modifications which might be necessary. 
COM96EN3.DOC, 9 July, 1996 
13 
Vehicle distribution 
Regulation 123/85 on the selective and exclusive distribution of cars was renewed with 
important changes from October 1995 by Regulation 1475/95-37, which is valid for 7 years. The 
changes introduced are aimed at ensuring more competition at the level of distribution, a better 
functioning of the internal market and a balance between the interests of all the parties 
concerned. 
The most important change relates to the introduction of the possibility for distributors to sell 
other vehicle brands under certain conditions ("multifranchising"), which include the need to 
ensure that sales are carried out in different premises, with separate management, without risk of 
confusing brands. In addition it is now also possible for a distributor to service different car 
brands. The new Regulation also provides for intervention by an arbitrator or an independent 
expert in case of conflict between distributor and manufacturer. Abuses of the Regulation are 
now subject to clearly enumerated sanctions which include withdrawal of the exemption in 
certain cases. 
The changes introduced by the Commission in the Regulation coupled with the evolution of 
market forces are likely to lead to a further concentration in the field of distribution by the 
increase in the average size of distributorships and an increase in multifranchising. The 
increasing sophistication of vehicles, notably their engine management systems as well as 
complex control systems to reduce pollution will require distributors to invest in expensive 
diagnostic equipment, a factor which again favours the larger dealer. 
External relations 
With regard to domestic policy towards Japanese imports, the Union's policy consists of 
ensuring that the arrangement with Japan (the "Elements of Consensus") continues to be applied 
in all its elements. Under this arrangement Japan's exports of cars and light commercial vehicles 
to the Union and to the five formerly restricted markets™ are monitored on an annual basis until 
end 1999. The arrangement has functioned satisfactorily so far and has contributed in an 
important way to creating conditions favourable to facilitating the industry's restructuring 
process. In 1995, Japanese exports are estimated to have attained the level of less than 800,000 
units, some 250,000 vehicles below the agreed monitoring level. Weak markets in Europe, the 
rise of the Yen and the improved competitiveness of European industry collectively explain this 
situation. At the same time as mentioned earlier transplant production is increasing, in line with 
forecasts, and is to some extent replacing Japanese exports. There has been no market disruption 
in the European market on account of Japanese sales. 
Externally, the Commission's policy is to promote equality of market access opportunities in the 
context of bilateral and multilateral trade negotiations and to encourage deregulation in order to 
lessen the regulatory burden on manufacturers. In 1995 particular emphasis was placed*en Japan 
and Korea. 
With respect to improving market access to the Japanese market the Commission has 
concentrated its efforts in the field of deregulation, the area identified by the European industry 
as having the greatest impact on its business. In June 1995, an agreement was reached with 
Japan on a series of measures in the regulatory sphere under which Japan on the one hand 
accepted that most tests necessary to meet Japanese automobile requirements could be 
undertaken in Europe and on the other hand agreed to eliminate, simplify and/or rationalise a 
number of specific Japanese requirements which add unnecessary costs to vehicles. In addition 
Japan agreed to adhere to the UN-ECE 1958 Agreement on the Mutual Recognition of 
Approvals in the field of motor vehicle equipment and parts. This is an extremely important 
commitment by Japan which will reinforce the international harmonisation process carried out 
"Reference O.J.L 145/1995 
38France, Italy, Portugal, Spain, UK 
C0M96EN3.DOC, 9 July, 199G 
14 
through the UN-ECE 1958 Agreement. The Commission will ensure that the undertakings given 
by Japan in the context of the June 1995 agreement are fully respected. We will continue to 
pursue outstanding deregulation requests and will continue to pursue unresolved issues when 
they arise. 
The Commission is also devoting considerable resources to monitor the application of the US-
Japan Agreement on Automobiles of July 1995 to ensure that its provisions are applied on an 
"most favoured nation" basis and that European car and car parts manufacturers are not 
discriminated against in this important market. Further to the requests of the Commission the 
United States and Japan have finally proposed to include the EU in the monitoring system of 
their agreement. The Commission has therefore been invited to participate at the annual meeting 
where all aspects of the agreement will be discussed. To this end the Commission is in the 
process of establishing a data base of core information as well as setting up its own channels of 
information to monitor all aspects of the Agreement. The active co-operation of all companies, 
national and European trade associations and the European Business Community in Japan is 
essential to ensure that this monitoring process is carried out successfully. This is another 
example of the need for close co-operation between government and industry in order to ensure 
results. 
With respect to Korea the Union has been concerned for a long time about the very small 
number of foreign vehicles sold on this market. Korea took steps to open its market in 1994 by 
reducing tariffs as well as the acquisition tax on luxury cars. The Commission reached 
agreement with Korea in the same year on a series of arrangements in the area of motor vehicle 
regulations, which provided for the recognition by Korea of a number of EU standards. In 1995 
Korea took further steps to open its market and concluded an arrangement with the US on 
automobile trade. Negotiations with the Commission have led to additional clarifications and 
flexibilities in application of Korean automotive regulations. The Korean market for cars and 
LCVs is very slowly opening up to foreign trade. While imports accounted for a mere 0.05% of 
the market in 1993, this figure rose to about 0.3% in 1994 and 0.5% in 1995, of which the 
European share was 0.3%. Having been to all intents and purposes closed for a number of years 
it must be recognised that it will take time for manufacturers to undertake the necessary 
investments to penetrate the market. At the same time it is essential that Korea pursues actively 
its policy of deregulation and market opening measures in order to encourage imports and to 
ensure that market access opportunities in Korea are comparable to those offered to foreign 
producers by the Union. Korea remains a priority market for the Union and its evolution will be 
kept under close surveillance. 
With regard to the countries of Central and Eastern Europe, the Commission policy aims at 
facilitating the restructuring and modernisation process of the associated countries' industry in 
order to promote their integration into the overall European economy. A major element of the 
pre-accession strategy for these countries is the alignment of their legislation with the 
requirements of the Internal Market. In the automotive sector, this requires not «only the 
transposition of technical prescriptions for European vehicle type-approval, but also the 
establishment of adequate structures for implementation and enforcement, as laid down in the 
White Paper on the "Preparation of the Associated Countries of Central and Eastern Europe for 
Integration into the Internal Market of the European Union" (COM (95) 163 final). 
In pursuit of the Council's request to draw up a list of market access barriers in third countries39, 
the Commission studied in 1995 market access conditions in some 15 countries. The results of 
this initial study showed that the levels of government intervention and trade protection 
prevailing in the industry were significantly higher than those affecting other industrial sectors. 
The report has now been enlarged to a total of 23 countries. This work has supported a bilateral 
dialogue on market access issues with a number of countries, including Japan, Korea, China, 
Brazil, Taiwan, India and the members of ASEAN. 
39See para. IÏ.7 of Council Resolution of 16 May 1994 on the Automobile Industry (OJ CI 49/94) 
C0M96EN3 DOC, 9 July, 1996 
15 
Foreign trade in automobiles can be facilitated if vehicles and components are produced 
according to internationally recognised product regulations. The Union and its Member States 
have always been at the forefront of this effort through their active support for the work 
undertaken at Working Party 29 of the UN-ECE, the body responsible for the implementation of 
the 1958 Agreement on mutual recognition. Two major initiatives are underway to reinforce this 
effort. On the one hand the Community must become a Member of the revised Agreement 
thereby solidifying the close link that already exists between EU Directives and UN-ECE 
Regulations in the motor vehicle area. To this end the Commission adopted a proposal to the 
Council in January 1996, which must also be given approval by the Parliament, authorising the 
Community's adherence to the Agreement. It is essential that this process be accomplished as 
quickly as possible, the more so as the European type approval system is now mandatory for new 
vehicle types and that certifications to UN-ECE Regulations are an alternative means to meeting 
the prescriptions of Community directives. The Commission considers that full safeguards are 
contained in the proposals for the Community's accession to UN-ECE agreement to ensure that 
the respective competences of the Commission, the Council and the European Parliament are 
fully safeguarded. 
At the same time it has to be recognised that this recently revised Agreement must be further 
developed in order to encourage the participation of more countries, notably the US, Korea, 
China, India and other new automobile producing states. Contacts are therefore taking place 
with a view to identifying additional changes that may be necessary. Industry led pressure for the 
international harmonisation of automobile regulations and certification procedures is growing, 
forcing regulators to accelerate work in this area. This is reflected in the conference on 
international regulatory harmonisation within the framework of the Trans Atlantic Business 
Dialogue organised in April 1996 in Washington, at which US and European industries drew up 
joint proposals on how to achieve harmonisation of emission, safety and certification procedures 
for consideration by governments and other interested parties. A detailed comparison of the 
differences between EU and US regulations is now being undertaken by the EU and US 
automobile industries. On the basis of this work the EU and the US will have to decide which 
path is the appropriate one to achieve the global convergence of regulations and progress 
towards international harmonisation. 
3.3 Developing industrial co-operation 
Within the EU, the Commission has encouraged the automotive components sector in particular 
to seek transnational collaboration» with the vehicle manufacturers and with each other, mainly 
with a view to promoting their increased participation in R&D and training programmes. In 
November 1994, VETIS, the first European buyers exhibition for the automotive sector, was 
held in Turin in order to promote transnational co-operation. At this event, 530 suppliers had 
more than 7000 business meetings with purchasing teams from over 50 vehicle manufacturers 
and system suppliers. A second VETIS will be held in November 1996. 
On the external side, the Commission has sought to reinforce the presence of the European 
automotive industry on promising and emerging markets. Priorities for co-operation in the 
coming years will be Japan, Korea, China, India, Eastern Europe and Turkey. Between the EU 
on the one side and Korea, China and India on the other side Automotive Business Fora have 
already taken place with the support of the Commission. In February 1996 a European 
automotive supplier mission to Detroit, aimed at stimulating co-operation between EU and US 
suppliers, was supported by the Commission. 
With a view to European-Japanese co-operation, the Commission will continue to support 
JAMA-CLEPA "Design-in" business conferences to promote business relations between 
Japanese vehicle manufacturers and European automotive component suppliers. The first one in 
Paris was held on 6/7 March 1995 and brought together 11 manufactures from Japan and 80 
component makers from 9 EU member states. There were 240 face-to-face meetings between 
C0M96EN3 DOC, 9 July, 1996 
16 
European suppliers and Japanese purchasing teams at this event. A second event modelled on the 
same lines took place in Berlin in May 1996, and a third meeting is already scheduled In the UK 
for 1997. 
In order to promote co-operation in the field of standards and technical regulations, the 
Commission, in co-operation with the European automotive industry, established a dialogue on 
regulatory issues with China and India. This was continued during a Standards Seminar which 
took place on the occasion of the 3rd EU-China Automotive Business Forum in Beijing in June 
1996 and involved representatives of the Commission, the European automobile industry and 
Chinese governmental authorities responsible for the development and implementation of safety 
and emission standards. As a follow-up to a Standards Seminar held in New Delhi in February 
1996 at the EU-India Automotive Business Forum, the Commission will continue discussions 
with a joint Government/industry delegation from India who will come to Europe in late 1996. 
3.4 Modernising the role of public authorities and 
creating a stable and beneficial business environment 
3.4.1 Ongoing initiatives to complete the Internal Market 
Type-Approval 
The EC Whole Vehicle Type-Approval system has been built up over a period of 25 years. In 
1996 an important benchmark was reached with the implementation on a mandatory basis of 
European whole vehicle type approval for new types of cars*0. With effect from this date 
national approvals are no longer permitted for new types. Prior to 1996 the system had been 
extensively deployed by manufacturers on an optional basis (up to September 1995, for example, 
213 Whole Vehicle Type Approvals and extension of such approvals had been reported to the 
Commission). 
The type approval system will become mandatory for all new cars in 1998. With respect to other 
vehicles - goods vehicles, buses and coaches - two pieces of legislation are missing, thereby 
preventing the implementation of a whole vehicle type approval system for these vehicles. The 
draft directive on masses and dimensions is still under discussion in the Council whilst on buses 
and coaches a directive on the specific safety prescriptions of such vehicles will be adopted by 
the Commission shortly. 
At the same time, serious reflection needs to be given to ways in which the adaptation of motor 
vehicles to technical progress could be better accomplished. There is currently an enormous 
backlog of requests by Member States and interested parties for technical adaptations that are 
quite beyond the resources of the Commission services to satisfy. Strict and limited priorities 
need to be drawn up which reflect consensus on the most pressing needs in the safety and 
environmental fields. For 1996 these include inter alia the need for a directive introducing UN-
ECE Regulation 44 on child seats. 
New efforts need to be made also to harmonise car registration procedures which continue to act 
as an obstacle to the smooth functioning of the type approval system. 
Car price differentials 
Price levels for automobiles have long been the subject of detailed attention - it being assumed 
that discrepancies in prices should trigger cross-border shopping as individuals or intermediaries 
attempt to take advantage of large potential savings. The persistence of price dispersion is often 
quoted as circumstantial evidence that the Internal Market is not working as well as it should, 
and that there are obstacles to consumer arbitrage in this market. Detailed analysis of price 
dispersion for similar car models across Member States has highlighted a number of factors 
which drive wedges between prices quoted in different Member States. The setting of different 
40Applies to Ml type vehicles 
COM96EN3 DOC, 9 July. 1996 
17 
prices in different Member States can be considered as a rational response of a producer when 
faced with the existence of national producers who, for historical reasons, act as price leader and 
price to their local market, or consumer differences - particularly, a preference for national 
marks which acts as a constraint on the pricing strategy of rival companies. 
However, there are policy distortions which do undermine the smooth functioning of the Internal 
Market in this sector. 
exchange rate volatility: In 1993, for 64% of models, net price differences (excl. taxes) 
were more than 20% between cheapest and most expensive country. By 1995, this figure had 
reached 93%. The countries which had depreciated most over the intervening period, were 
systematically those where prices were lowest in 1995. Further evidence on the impact of 
exchange rate instability can be obtained by comparing price differentials between countries 
whose currencies remained stable and those where they depreciated. Differentials between car 
prices in the former group are low and continue to decline. Much of the dispersion (and volatility 
of dispersion) is accounted for by countries whose currencies have been depreciating. 
substantial differences in vehicle taxes in force in different Member States: High levels 
of taxation require producers/retailers to lower their pre-tax prices in these markets in..order to 
maintain sales. Purchasers in partner countries, who are entitled to purchase vehicles free of 
taxes (taxes have to be paid in the country of registration) might be attracted by these lower pre­
tax prices. Analysis carried out in the context of the assessment of the impact and effectiveness 
of the Internal Market programme suggests that dealers in frontier regions bordering countries 
with low pre-tax prices are forced to lower prices in order to maintain turnover. This suggests 
both that cross-border shopping does constrain pricing, but more importantly that disparities in 
sales/purchase taxes distort prices in a manner which is injurious to dealers and producers. 
The Commission is attentive to complaints concerning difficulties experienced by consumers 
who have purchased cars in another Member State in respect of registration of their vehicle. To 
this end, an interpretative document on administrative treatment of cross-border purchases has 
been published (OJ 96/C 143/04). 
Taxation differences 
In its last report on the situation of the automobile industry the European Parliament has noted 
that taxation levels for the purchase an average 2000 cc car vary at the moment between 15% in 
Germany and over 200% in Denmark.41 Since large tax differentials across the Union can distort 
competition and notably endanger the existence of car dealers in border regions, the Parliament 
has called on the Commission to complete the single market by putting forward proposals to 
harmonise taxes related to the purchase, registration and use of the car. The Commission has 
already taken action towards tax harmonisation: the introduction of minimum VAT levels in 
1993 was also linked to the abolition of excessively high VAT rates for car purchases in some 
member states. In addition, the Commission has commenced a comprehensive review of the 
different types of taxation applied to vehicles in different Member States to examine whether 
there is need for further approximation of such taxes for internal market reasons. The review will 
also assess what other Community policies could be advanced by initiatives in this area. 
Safety issues 
Important initiatives, leading to enhanced safety of vehicle occupants, are underway in the 
following areas: 
Protection of passengers against frontal impacts 
A new Council and Parliament directive is currently under discussion and is expected to be 
adopted later this year. Applicable to passenger cars, it sets out an up-to-date frontal impact test 
procedure which is representative of real accidents. The Directive will be mandatory for the 
approval of new designs after 1 October 1998. 
4,PE211.149/fin. 
COM96EN3 DOC, 9 July, 1996 
Protection of passengers against side impacts 
A new Council and Parliament directive has been adopted and will enter into force later this 
year. Applicable to passenger cars and car-derived vans, it introduces requirements for side 
impact protection for the first time. It will be mandatory for new vehicle designs after 1 October 
1998. 
Bus and coach seat belts 
The Commission has adopted amendments to three directives which will introduce requirements 
for 3-point belts in all minibus seats and 2-point belts, together with energy-absorbing seats, for 
coaches. The adoption of these measures became possible following the positive opinion given 
by the Regulatory Committee of Member States in April 1996 and ensures that the first phase of 
the "integrated approach" to improving bus and coach safety announced by Commissioner 
Bangemann in March 1994 has been completed. 
Bus and coach construction directive 
A proposal for a new Council and Parliament directive (the second phase of the "integrated" 
approach) is expected to be published shortly. It will set out technical requirements for roll-over 
protection, stability and other safety features such as number of exits. Once adopted, this 
directive will allow complete vehicles to obtain EU type-approval for the first time, to the 
benefit of the internal market. 
Other measures to enhance road safety 
In order to improve safety on European roads and especially for pedestrians, it is also important 
that complementary national and local measures like improvements of the infrastructure, traffic 
management and better driver education are pursued actively. 
Environmental issues 
The production, use and scrappage of automobiles remain subjects of considerable 
environmental concern. The Commission is undertaking a series of initiatives in all these areas. 
The need to control noxious pollutant emissions is long-standing and work is advanced in the 
Commission on proposals to reduce vehicle emissions further from the year 2000. New 
proposals for car emission reductions have been adopted by the Commission on 18 June 1996. 
They will be followed shortly thereafter by proposals on light commercial vehicles and diesel 
engines of heavy goods vehicles. These measures, as well as measures to improve fuel quality, 
will be based on the results of the Auto-Oil programme, a unique collaboration between the 
Commission and the automobile and petroleum industries aimed at providing a sound data base 
for future measures. In accordance with the principles laid down in Article 4 of Directive 94/12, 
the last car emissions directive, the objective is to determine the most cost-effective combination 
of measures - technical and non-technical - susceptible to reduce emissions in accordance with 
air quality objectives. Technical measures include improved vehicle technologies and 
reformulated fuels, and better in use inspection and maintenance. Non-technical measures 
include such measures as the support to public transport, scrappage schemes and road pricing. 
Analysis is also taking place examining the extent to which technical standards could be 
complemented by economic instruments and fiscal incentives without damaging the internal 
market. 
In addition, the proposal sets out indicative limit values to be applied during a second stage, to 
reduce vehicle emissions in the year 2005. The purpose of introducing a second stage is twofold: 
- it provides uniform targets to those Member States who would like to stimulate the 
improvement of environmental technologies by granting fiscal incentives 
- it gives advance notice to the automobile industry of the measures likely to be applied from 
that date. In the meantime, taking into account that the limit values correspond to technologies 
that are currently being developed, such as the NOx catalytic converter, it has been decided that 
the indicative limit values proposed will be subject to confirmation by no later than 31 
C0M96EN3 DOC, 9 July, 1996 
19 
December 1998 on the basis of the Auto-Oil II programme. The Commission expects that the oil 
and automobile industries will continue to co-operate constructively with a view to identifying 
the most cost-effective measures in order to reduce environmental pollution. 
In December 1996 the Commission adopted a strategy paper setting out how to reduce C02 
emissions from automobiles which are a major contributor to anthropogenic emissions of C02 
and which contribute to global warming. At the Environment Council of June 1996, the 
Commission's approach was broadly endorsed. The centre-piece of this strategy consists of a 
voluntary monitored agreement to be negotiated with industry (European and importers) aimed 
at reducing the average fuel consumption of new cars to a level equivalent to 5 1/100 km for 
petrol cars and 4.51/100km for diesel cars by 2005 (if possible) or 2010 at the latest. 
Negotiations with industry will begin shortly. The Council will be informed of progress achieved 
by December 1996. 
Work is also advanced on a Commission proposal on the treatment of end-of-life vehicles, an 
environmental problem of growing concern. While manufacturers are paying particular 
attention today to design cars which can be more easily dismantled and recycled, there are still 
concerns that the amount of recyclable material is not high enough nor is the overall.recovery 
rate satisfactory. It remains to be seen if these issues should be dealt with through legislation 
(for example by setting mandatory quotas of recyclable material) or whether a voluntary 
approach, building on industry experience so far should be followed instead.42 Whichever 
solution is finally adopted, it is essential that all actors - manufacturers, suppliers, dismantlers, 
treatment plants play their role and that the burden is not unreasonably placed on one segment of 
the industry. 
Finally, in the environmental area, the Commission's White Paper on Energy Policy43 indicated 
the need to take account of possible developments in biofuels and to support their introduction. 
Transport policy 
The proliferation of the motor vehicle in Europe has brought many advantages, notably 
increased economic growth and personal mobility. While acknowledging this, the Commission 
has also taken note of the fact that the development of the vehicle fleet has resulted in 
congestion, pollution and accidents, all of which affect both car users and those without access 
to cars. As part of a strategy to tackle these problems and to promote the most efficient modal 
split, the Commission has recently produced a Green Paper on the creation of a "Citizens' 
Network" in order to promote public transport and another one on "Fair and Efficient Pricing in 
Transport". 
The Green Paper on the "Citizens' Network" aims at promoting high quality public transport 
systems and encouraging networks that fit together so that passengers can easily change from 
one transport mode to another. It is deemed essential that individual modes and public transport 
operations are integrated more effectively. The Green Paper on "Fair and Efficient Pricing in 
Transport" aims at making transport pricing systems fairer and more efficient in order to 
influence transport users to minimise the overall costs and negative external effects of transport. 
Furthermore, the European Council has endorsed the Commission proposal to create a 
TransEuropean transport network in December 1993. The huge potential for competitiveness, for 
generating jobs, for improving links across the Union and for the efficient functioning of the 
Single Market has been recognised by the Member State governments. Despite the agreement on 
the positive effect of creating these networks, projects still lack financial support by the Member 
States. For car users, the creation of a truly trans-European road network would have 
considerable advantages. The road network cannot be extended indefinitely due to the lack of 
space, notably in densely populated areas. But roads and cars can become more intelligent, 
making use of the range of technologies that are being developed in the framework of the 
42 A number of voluntary agreements have already been signed in the member states between 
governments and the automobile industry 
43COM (95)682 
C0M96EN3.DOC, 9 July, 1996 
20 
creation of the information society. It has been estimated that the use of transport telematics 
alone, as has been suggested as part of the TransEuropean Networks project, can increase the 
capacity of the existing infrastructure by up to 20%. Improved interoperatability between 
different transport modes would also greatly benefit motor vehicle users. Furthermore, the 
building of new roads in peripheral regions and in areas bordering the Central and Eastern 
European economies would notably benefit the integration of these regions into the Single 
Market economy. 
3.4.2 Orientations for the future 
Improved co-ordination of regulatory policies 
Regulatory policy is based above all on the need to harmonise divergent national regulations and 
ensure high levels of safety, environmental and consumer protection in accordance with Article 
100A of the Treaty. Much of the regulatory activity in this area is linked to the putting in place 
of the European type-approval system for motor vehicles. Hitherto it could be said that policy 
was governed above all by the twin objectives of the need to ensure that the highest safety 
standards prevail on the European market and that pollutant emissions are minimised in 
consistency with the availability of technologies. 
More recently it has become clear that regulatory pressure on the industry has become more 
intense as public authorities have been obliged to react to public pressure demanding the further 
regulation and control of the industry. Currently issues directly concerning the automobile 
industry are subject to the following major policy initiatives :-
Preparation of new emission standards for "stage 2000" for cars, light duty vehicles and 
heavy duty diesel engines in accordance with the results of the "Auto-Oil" programme; 
completion of the current co-decision procedure on light commercial vehicles. 
Completion of the co-decision procedure regarding the introduction by 1998 of new 
crashworthiness standards to protect car occupants against front and side impact crashes; 
Preparation of a draft directive on the treatment of "End of Life" vehicles which will have 
important consequences for the automobile industry; 
Preparation of a new directive on "pedestrian friendly car fronts" designed to reduce the 
dangers of car fronts for pedestrians; 
Commission Communication on options to reduce CO2 emissions from cars. 
Commission Green Paper on the internalisation of external costs from transport. 
The co-decision procedure currently underway on the directive on "design protection" 
and the specific provisions for crash repair parts which are design protectable. 
Each of these initiatives responds to a particular political, economic, social or environmental 
need and in themselves are perfectly justifiable. Collectively, however, they amount to a quite 
formidable system of regulation or potential regulation on the industry which, taken as a whole, 
profoundly affects the business environment in which the automobile industry functions in 
Europe and, indirectly, in third markets. Given that the strengthening of industrial 
competitiveness, high value added employment and investment in Europe remain goals of 
industrial policy, much more attention must be given to the overall interaction of different policy 
initiatives and their impact on the sector as a whole. To take a simple example, additional safety 
requirements on the one hand, and high recyclability requirements on the other, would lead to 
the addition of weight to a vehicle which, ceteris paribus, will increase fuel consumption. This 
emphasises the need to give greater prominence to the impact on competitiveness of different 
regulatory and other actions affecting industry as a whole, a matter which should be reviewed in 
the Intergovernmental Conference renewing the Maastricht Treaty. In order to encourage further 
discussion about how better co-ordination of policies can be achieved, the Commission has 
drawn up an inventory of future regulatory measures, that will be updated on a regular basis. 
COM96EN3 DOC, 9 July, 1996 
21 
The high level advisory group 
The idea to create a high-level group advising the Commission on questions concerning the 
automotive sector and the use of motor vehicles as a means of transport was first advocated by 
the Economic and Social Committee and taken up by the European Parliament, which, in its 
Resolution of 21 September 1995^ asked the Commission to create "a high level panel made 
up of industry, social partners, motoring organisations/user groups, the Parliament and the 
Commission to meet three times a year to review the impact of the range of EU policies as they 
effect the automobile industry..." The Commission in principle accepts this suggestion and is 
now consulting ACEA (car manufacturers), CLEPA (component makers), the social partners and 
user groups to obtain their endorsement, which is essential for the project to succeed. The panel 
will comprise a core group of some CEOs from the major car companies, and will be modelled 
after the one already existing in the maritime industry. 
It is also foreseen to establish another high level panel soon. This group, comprising senior 
representatives from the Commission, the automobile and component industries, but also power 
generating utilities and public authorities, will have the mandate to advise the Commission on 
research priorities and strategies. There are strong practical arguments for merging the two 
suggested high level groups into one organisational structure, comprising a top lever panel to 
discuss political questions with Commissioners and MEPs, and a sub-panel on research which 
would bring together the company board members responsible for R&D. 
The issue of regulatory coherence in the automobile industry that was discussed above is 
particularly relevant in the environmental sphere and should be a key matter to be taken up by a 
high level advisory group. 
44PE 193/733 
COM96EN3 DOC, 9 July, 1996 
22 
4. Summary 
In its resolution on the automobile industry, the European Council "recognises that the Union 
has an important role to play in creating a favourable business environment for the automobile 
industry which sets an appropriate framework for a future-oriented and coherent approach to 
the development, production, distribution and use of the automobile and its impact on the 
environment and on society as a whole ". 
Since this resolution was passed, important achievements have been made: 
The Task Force "Car of tomorrow" has started to operate 
The Block Exemption Regulation for the distribution of motor vehicles 
has been renewed 
Industrial co-operation has been established with China / India 
The Korean and Japanese markets have been opened further to European 
imports 
Contacts between European suppliers and Japanese manufacturers have 
been enhanced at the JÀMA-CLEPA business conference with the 
support of the European Commission 
The necessary regulatory work for the EC Type-Approval, becoming 
mandatory for new types of passenger cars in 1996, has been completed 
The results of the Auto-Oil programme, which is based on air quality targets 
for major European cities and a detailed cost-benefit assessment, have been 
released and have been used as the basis for new Commission proposals to 
reduce passenger car emissions 
New safety and environmental initiatives have been taken (front and side impact 
crash protection, safety belts in buses and coaches) and more are underway 
A training network has been initiated with funding from the FORCE programme, 
resulting in 53 concrete, innovative training project proposals. The continuation 
of networking under the LEONARDO programme has been confirmed 
However, as explained in this Communication, further joint industry - governmental efforts need 
to be undertaken to facilitate a further improvement in the industry's competitiveness. The 
Commission will continue to work in order to improve the framework conditions for the 
European automotive industry, utilising cost-benefit assessment techniques to take 
environmental and social constraints into account in new regulatory policy. Europe's automobile 
industry is one of the bedrocks on which the European economy is built. It is an asset to be 
carefully developed. Both, public authorities on the one hand, and employers and workers on the 
other, have key roles to play to ensure that this can be achieved. 
COM96EN3.DOC, 9 July, 1996 
Zj 
Graphs and Tables 
Graph 1 : Total light vehicle production by major group in 1995 
Graph 2: Average net present values for car manufacturing investments 
Table 1 : Market shares: New car and LCV registrations in the EU, USA, Japan and Korea 
Table 2: World car and LCV production 
Table 3 EU 12 trade with extra-EU 
Table 4 Unit labour cost EU/USA/Japan 
Table 5 Employment NACE 3500 by member state 
Table 6 New car registrations 1-3 1996 
COM96EN3 DOC, 9 July. 1996 
Graph 1: 
Total Light Vehicle Production by Major Group in 1995: 
DRI Mc Graw-Hill / LMC 
Graph 2: 
Average Net Present Values for car manufacturing investments 
2500 
2000 
1500 
1000 
500 
0 
-500 ! i 
EU Highest USA Japan -104MECU 
EU LowsBT 
Ik 
Table 1 Registrations in thousand 
Market shares : 
New car & LCV registrations in the EU, USA, Japan and South Korea. 
vw GROUP r V 
GMEC) 
PSA (*•) 
FIAT 1**) 
FORD EUROPE (**) 
RENAULT C") 
BMW + Rover (•*) 
MERCEDES 1*") 
VOLVO (**) 
TOT. EU (Prod, in EU 15) 
JAPANESE 
IMPORTS FROM JAP. 
PROD. IN EU 15 
PROD. IN US 
PROD. IN OTHER ZONES 
US 
KOREAN 
OTHERS 
TOTAL 
USA 
GM 
FORD 
CHRYSLER 
BIG3 
JAPANESE 
TOTAL EU 15 (••*) 
KOREAN 
TOTAL 
JAPAN 
TOYOTA 
NISSAN 
MITSUBISHI 
HONDA 
OTHER JAPANESE 
TOTAL JAPAN 
US Unci. Jap. trans.) 
US-BIG 3 
TOT. EU 15 find. Jap. trans.) 
EU MAKES (••*) 
OTHERS 
TOTAL 
SOUTH KOP$A 
HYUNDAI 
KIA 
DAEWOO 
OTHER KOREAN 
TOTAL KOREAN 
US 
TOTAL EU 15 
JAPAN 
TOTAL REGISTR. 
1993 
1793.9 
1453.0 
1466.8 
1226.8 
1406.3 
1312.8 
744.6 
488.6 
180.3 
10073.2 
1510.8 
1084.8 
379.5 
21.7 
24.8 
58.2 
92.3 
308.4 
12042.8 
3562.4 
4667.0 
2047.8 
10277.2 
3213.0 
318.0 
109.5 
13917.2 
2058.0 
1098.0 
717.7 
405.1 
1987.2 
6266.0 
54.5 
19.3 
145.0 
144.0 
1.8 
6467.3 
689.3 
495.1 
277.7 
41.6 
1503.7 
1.4 
0.5 
0.0 
1505.7 REGISTR. 
1994 
1845.3 
1535.7 
1600.9 
1349.1 
1513.5 
1442.5 
793.1 
560.5 
214.4 
10855.1 
1430.1 
904.9 
463.1 
34.6 
27.5 
61.9 
114.9 
318.8 
12780.8 
5015.9 
3818.1 
2204.0 
11038.0 
3508.0 
405.1 
138.3 
15089.4 
2031.0 
1046.0 
755.2 
501.3 
1891.8 
6225.3 
102.5 
36.7 
173.1 
171.1 
25.7 
6526.7 
722.9 
412.3 
249.6 
171.5 
1556.3 
1.8 
2.0 
0.0 
1560.1 REGISTR. 
1995 
1977.5 
1544.8 
1509.7 
1394.8 
1535.3 
1358.7 
773.3 
547.7 
228.3 
10870.2 
1400.0 
836.0 
498.6 
28.9 
36.6 
66.6 
182.8 
336.7 
12856.3 
4841.6 
3801.0 
2164.3 
10806.9 
3364.5 
462.8 
132.1 
14766.3 
2029.0 
1131.6 
820.0 
567.0 
1929.3 
6476.9 
143.2 
40.6 
223.3 
221.7 
21.6 
6865.0 
746.1 
441.5 
198.9 
169.8 
1556.3 
2.6 
4.3 
0.0 
1563.3 CHANGE 
94/93 
{*) 
2.9% 
5.7% 
9.1% 
10.0% 
7.6% 
9.9% 
6.5% 
14.7% 
18.9% 
7.8% 
-5.3% 
-16.6% 
22.0% 
59.6% 
11.0% 
6.4% 
24.4% 
3.4% 
6.1% 
40.8% 
-18.2% 
7.6% 
7.4% 
9.2% 
27.4% 
26.3% 
8.4% 
-1.3% 
•4.7% 
5.2% 
23.7% 
-4.8% 
-0.6% 
88.2% 
90.2% 
19.4% 
18.8% 
1333.3% 
0.9% 
4.9% 
-16.7% 
-10.1% 
312.6% 
3.5% 
27.6% 
292.4% 
3.6% CHANGE 
95/94 
(*) 
7.2% 
0.6% 
-5.7% 
3.4% 
1.4% 
-5.8% 
-2.5% 
-2.3% 
6.5% 
0.1% 
-2.1% 
-7.6% 
7.7% 
•16.5% 
33.0% 
7.5% 
59.1% 
5.6% 
0.6% 
-3.5% 
-0.4% 
-1.8% 
-2.1 % 
-4.1 % 
14.2% 
-4.4% 
-2.1% 
-0.1% 
8.2% 
8.6% 
13.1% 
2.0% 
4.0% 
39. 7% 
10.7% 
29.0% 
29.6% 
-16.0% 
5.2% 
3.2% 
7.1% 
-20.3% 
-1.0% 
0.0% 
39.8% 
121.4% 
0.2% MARKET 
SHARE 
1993 
14.9% 
12.1% 
12.2% 
10.2% 
11.7% 
10.9% 
6.2% 
4.1% 
1.5% 
83.6% 
12.5% 
9.0% 
3.2% 
0.2% 
0.2% 
0.5% 
0.8% 
2.6% 
100.0% 
25.6% 
33.5% 
14.7% 
73.8% 
23.1% 
2.3% 
0.8% 
100.0% 
31.8% 
17.0% 
11.1% 
6.3% 
30.7% 
96.9% 
0.8% 
0.3% 
2.2% 
2.2% 
0.0% 
100.0% 
45.8% 
32.9% 
18.4% 
2.8% 
99.9% 
0.1% 
0.0% 
0.0% 
100.0% MARKET 
SHARE 
1994 
14.4% 
12.0% 
12.5% 
10.6% 
11.8% 
11.3% 
6.2% 
4.4% 
1.7% 
84.9% 
11.2% 
7.1% 
3.6% 
0.3% 
0.2% 
0.5% 
0.9% 
2.5% 
100.0% 
33.2% 
25.3% 
14.6% 
73.2% 
23.2% 
2.7% 
0.9% 
100.0% 
31.1% 
16.0% 
11.6% 
7.7% 
29.0% 
95.4% 
1.6% 
0.6% 
2.7% 
2.6% 
0.4% 
100.0% 
46.3% 
26.4% 
16.0% 
1 1.0% 
99.8% 
0.1% 
0.1% 
0.0% 
100.0% MARKET 
SHARE 
1995 
15.4% 
12.0% 
11.7% 
10.8% 
11.9% 
10.6% 
6.0% 
4.3% 
1.8% 
84.6% 
10.9% 
6.5% 
3.9% 
0.2% 
0.3% 
0.5% 
1.4% 
2.6% 
100.0% 
32.8% 
25.7% 
14.7% 
73.2% 
22.8% 
3.1% 
0.9% 
100.0% 
29.6% 
16.5% 
11.9% 
8.3% 
28.1% 
94.3% 
2.1% 
0.6% 
3.3% 
3.2% 
0.3% 
100.0% 
47.7% 
28.2% 
12.7% 
10.9% 
99.6% 
0.2% 
0.3% 
0.0% 
100.0% 
Source : DRI Mc Graw Hill / LMC & Polk / AAA / Automotive News / JAMA / JAIA / KAMA 
(*) Percentage change calculated on exact registrations figures 
(**) EU manufacture/s' figures ( registrations. % change and market share ) for cars & LCVs produced and registered in the EU 15 market only are estimates 
("*) Market shares are greater for the the new passenger car market only (i.e. excluding LCVs) 
SHEET536.XLS / 1 
is 
Table 2 
WORLD CAR AND LCV PRODUCTION 
TOP TEN CAR & LCV PRODUCING COUNTRIES IN 1995. 
(in 1,000) EXCLUDING DOUBLE COUNTING 
USA 
JAPAN 
GERMANY 
FRANCE 
SOUTH KOREA 
CANADA 
SPAIN 
UK 
ITALY 
BRAZIL PASSENGER CARS 
6338 
7611 
4360 
2365 
2031 
1327 
1959 
1532 
1422 
1216 LCV 
5301 
2234 
171 
270 
535 
1041 
350 
205 
213 
246 LIGHT VEHICLES 
11639 
9845 
4531 
2635 
2566 
2368 
2309 
1737 
1635 
1462 
WORLD SUMMARY 
(in 1,000) PRODUCTION OF CARS & LCV IN 1995. 
EXCLUDING DOUBLE COUNTING 
EU15 
EASTERN EUROPE 
USA 
OTHER NAFTA 
NAFTA - SUB TOTAL 
JAPAN 
SOUTH KOREA 
OTHER ASIA 
ASIA - SUB TOTAL 
LATIN AMERICA 
OTHER 
TOTAL PASSENGER CARS 
12617 
2025 
6338 
2025 
8363 
7611 
2031 
902 
10544 
1449 
561 
35559 LCV 
1293 
212 
5301 
1254 
6555 
2234 
535 
917 
3686 
291 
115 
12152 LIGHT VEHICLES 
13910 
2237 
11639 
3279 
14918 
9845 
2566 
1819 
14230 
1740 
676 
47711 
Source : DRI Mc Graw Hill / Marketing Systems 
WORLD CAR & LCV PRODUCTION IN 1995(*) 
LATIN AMERICA 
4% 
SOUTH KOREA 
5% 
(*) Cleared of Double Counti n_9_Z] / EASTERN EUROPE 
5% 
8/07/96 SHEET580.XLS /1 
Table 3 
EU 12 TRADE WITH EXTRA-EU (*) 
NEW PASSENGER CARS & LCVSs 
UNITS 
1990 
1991 
1992 
1993 
1994 EXPORTS TO EXTRA-EU 
1,816,049 
1,555,041 
1,575,737 
1,760,635 
2,218,438 IMPORTS FROM EXTRA-EU 
1,747,389 
1,944,494 
1,903,710 
1,629,765 
1,420,765 NET TRADE 
68,660 
-389,453 
-327,973 
130,870 
797,673 
Source : Eurostat / Comext 
NEW PASSENGER CARS & LCVSs 
000 ECU 
1990 
1991 
1992 
1993 
1994 EXPORTS TO EXTRA-EU 
22,069,335 
18,953,146 
19,379,697 
23,014,965 
29,656,735 IMPORTS FROM EXTRA-EU 
11,314,221 
13,731,383 
14,651,404 
1,239,798 
12,377,942 NET TRADE 
10,755,114 
5,221,763 
4,728,293 
21,775,167 
17,278,793 
Source : Eurostat / Comext 
PARTS & ACCESSORIES FOR MOTOR VEHICLES (**) 
000 ECU 
1990 
1991 
1992 
1993 
1994 EXPORTS TO EXTRA-EU 
14,164,033 
14,712,329 
14,808,697 
16,190,565 
18,173,144 IMPORTS FROM EXTRA-EU 
9,981,038 
10,825,793 
12,004,406 
12,467,708 
15,414,109 NET TRADE 
4,182,995 
3,886,536 
2,804,291 
3,722,857 
2,759,035 
Source : Eurostat / Comext 
t* ') Includes parts & accessories for motor vehicles ICN code 8708); 
as well as other relevant parts & components for motor vehicles included in chapters 40; 68; 70; 83; 84; 85; 87; 94 of the Combined nomenclature. 
\NEW PASSENGER CARS & LCVSs + PARTS & ACCESSORIES FOR MOTOR VEHICLES 
000 ECU EXPORTS TO EXTRA-EU IMPORTS FROM EXTRA-EU NET TRADE 
1990 36,233,368 21,295,259 14,938,109 
1991 33,665,475 24,557,176 9,108,299 
1992 34,188,394 26,655,810 7,532,584 
1993 39,205,530 13,707,506 25,498,024 
1994 47,829,879 27,792,051 20,037,828 
000 ECU 
50,000,000 
45,000,000 
40,000,000 
35,000,000 
30,000,000 
25,000,000 
20,000,000 
15,000,000 
10,000,000 
5,000,000 
0 jEEg ki^P 
5sJ—i tsss^ 
Hi EEÎM 
=jj|:| T^T1 
t. H^ 5 
r~~r iii E^ 
1 4 •1 1 
ill ^ 1 
H EXPORTS TO EXTRA-EU 
0 IMPORTS FROM EXTRA-EU 
• NET TRADE 
1990 1991 1992 1993 1994 
Source : Eurostat / Comext 
CI Note : Austria, Sweden & Finland were not members of the EU in 1990-1994 and are therefore included as trading partners. 
27/06/96 SHEET469.XLS 
7^ 
Table 4 
Unit labour cost * in the automobile industry : An international comparison. 
France 
Germany 
Italy 
Spain 
United Kingdom 
Belgium 
Netherlands 
Japan 
USA 1980 
72% 
77% 
67% 
64% 
92% 
74% 
72% 
44% 
63% 1993 
59% 
78% 
69% 
55% 
66% 
60% 
63% 
44% 
47% 1995 (p) 
54% 
74% 
59% 
46% 
59% 
60% 
68% 
50% 
44% 
SOURCE : VDA, NACE, JAMA, MMVA, DRI, National Associations. 
Ip) preliminary data 
* Labour cost per unit of gross value added. 
100% 
90% J 
80% -; 
70% 
60% 
50% 
40% 
30% 
20% 
10% 
0% D1980 
S1993 
1 01995 (p) 
France Italy United Kingdom Netherlands USA 
SHEET517.XLS 
Table 5 
Employment NACE 3500 (Motor Vehicles and Parts) 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 
1988 
1989 
1990 
1991 
1992 
1993 
1994 Germany 
725,994 
724,966 
719,084 
727,429 
740,416 
755,007 
773,725 
785,448 
780,824 
787,426 
822,408 
834,696 
806,699 
730,787 
685,116 France 
484,850 
456,214 
443,646 
438,178 
421,427 
394,021 
369,223 
358,096 
351,616 
344,085 
345,038 
339,900 
331,713 
315,014 
307,297 UK 
437,159 
356,989 
313,216 
290,035 
280,114 
268,808 
253,192 
250,895 
258,481 
259,770 
260,977 
239,084 
226,758 
204,450 
195,870 Italy 
294,910 
272,055 
261,936 
241,332 
226,727 
210,244 
200,649 
200,028 
203,718 
208,359 
211,850 
206,735 
193,383 
177,232 
165,617 Spain 
159,851 
145,057 
144,269 
145,281 
142,561 
138,520 
136,872 
142,603 
141,628 
146,670 
147,106 
146,864 
144,500 
135,722 
134,050 Belgium 
55,075 
49,959 
49,461 
48,636 
48,271 
50,359 
51,770 
51,390 
52,865 
54,283 
55,774 
55,160 
54,829 
52,292 
49,534 Sweden * 
116,900 
113,800 
113,800 
106,100 
107,800 
113,500 
113,900 
114,400 
112,500 
115,300 
107,600 
102,900 
96,400 
94,204 
Employment by Member State (NACE 3500) 
900,000 
800,000 
700,000 
600,000 
500,000 
400,000 
300,000 
1980 1982 1984 1986 1988 1990 1992 1994 -a-F 
-•-UK 
I 
E 
B 
SWE 
= Source UNIDO (Manufacture of Transport Vehicles and Parts) 
Source: Eurostat 
C) (% 
Table 6 Sales figures in thousand 
Market shares 
New car & LCV registrations in the EU, USA, Japan and South Korea 
MÊmmÊmÊmmÊÊÊÊÊÊmÊmi 
VW GROUP (") 
GME (") 
PSA (") 
FIAT (") 
FORD EUROPE (") 
RENAULT (") 
BMW + Rover (") 
MERCEDES (") 
VOLVO (") 
TOT. EU (Prod, in EU 15) 
JAPANESE 
IMPORTS FROM JAP. 
PROD. IN EU 15 
PROD. IN US 
PROD. IN OTHER ZONES 
US 
KOREAN 
OTHERS 
TOTAL 
USA 
GM 
FORD 
CHRYSLER 
BIG3 
JAPANESE 
TOTAL EU 15 
KOREAN 
TOTAL 
lillllllll^^ 
TOYOTA 
NISSAN 
MITSUBISHI 
HONDA 
OTHER JAPANESE 
TOTAL JAPAN 
US (Incl. Jap. trans.) 
US-BIG 3 
TOT. EU15 (Incl. Jap. trans.) 
EU MAKES 
OTHERS 
TOTAL 
SOUTH KOREA 
HYUNDAI 
KIA 
DAEWOO 
OTHER KOREAN 
TOTAL KOREAN 
US r») 
TOTAL EU 15 (**") 
JAPAN ("**) 
TOTAL REGIST. 
1-III 
95 
514.5 
422.6 
423.4 
412.5 
427.1 
382.5 
204.8 
145.4 
65.9 
2998.8 
379.7 
235.0 
126.7 
8.8 
9.2 
15.1 
34.1 
910 
3518.7 
1123.5 
928.6 
524.6 
2576.7 
764.7 
105.0 
29.1 
3475.5 
573.3 
342.9 
238.1 
148.0 
536.4 
1838.7 
30.2 
11.6 
53.8 
47.7 
13.1 
1935.8 
177.9 
104.7 
49.6 
36.2 
368.4 
0.5 
0.9 
0.0 
369.8 REGIST. 
1-III 
96 
566.5 
434.3 
441.5 
459.2 
449.0 
382.6 
206.5 
163.5 
47.8 
3150.9 
397.2 
2317 
143.3 
6.8 
15.3 
15.9 
59.7 
99.4 
3723.1 
1141.8 
937.9 
591.3 
2671.0 
805.1 
115.0 
25.8 
3617.0 
ggggggggggSg: 
564.3 
267.7 
227.8 
164.5 
628.6 
1852.9 
42.7 
15.8 
61.2 
56.9 
9.6 
1966.4 
172.8 
110.4 
38.4 
63.9 
385.6 
0.7 
1.4 
0.0 
387.7 CHANGE 
% 
n 
10.1% 
2.8% 
4.3% 
11.3% 
5.1% 
0.0% 
0.8% 
12.4% 
-27.5% 
5.1% 
4.6% 
-14% 
13.1% 
-22.8% 
65.8% 
5.5% 
75.0% 
9.3% 
5.8% 
1.6% 
1.0% 
12.7% 
3.7% 
5.3% 
9.6% 
-11.2% 
4.1% 
-1.6% 
-21.9% 
-4.3% 
11.1% 
17.2% 
0.8% 
41.3% 
36.2% 
13.8% 
19.4% 
-26.1% 
1.6% 
-2.9% 
5.5% 
-22.5% 
76.7% 
4.7% 
4.8% MARKET 
SHARE 
1 - III 95 
14.6% 
12.0% 
12.0% 
11.7% 
12.1% 
10.9% 
5.8% 
4.1% 
1.9% 
85.2% 
10.8% 
6.7% 
3.6% 
0.3% 
0.3% 
0.4% 
1.0% 
2.6% 
100.0% 
32.3% 
26.7% 
15.1% 
74.1% 
22.0% 
3.0% 
0.8% 
100.0% 
29.6% 
17.7% 
12.3% 
7.6% 
27.7% 
95.0% 
1.6% 
0.6% 
2.8% 
2.5% 
0.7% 
100.0% 
48.1% 
28.3% 
13.4% 
9.8% 
99.6% 
0.7% 
0.2% 
0.0% 
100.0% MARKET 
SHARE 
1 - III 96 
15.2% 
11.7% 
11.9% 
12.3% 
12.1% 
10.3% 
5.5% 
4.4% 
1.3% 
84.6% 
10.7% 
6.2% 
3.8% 
0.2% 
0.4% 
0.4% 
1.6% 
2.7% 
100.0% 
31.6% 
25.9% 
16.3% 
73.8% 
22.3% 
3.2% 
0.7% 
100.0% 
28.7% 
13.6% 
11.6% 
8.4% 
32.0% 
94.2% 
2.2% 
0.8% 
3.1% 
2.9% 
0.5% 
100.0% 
44.6% 
28.5% 
9.9% 
16.5% 
99.5% 
0.2% 
0.4% 
0.0% 
100.0% Point 
change 
0.59% 
-0.34% 
-0.17% 
0.61% 
-0.08% 
-0.60% 
-0.28% 
0.26% 
-0.59% 
-0.59% 
-0.12% 
•-0.46% 
0.25% 
-0.07% 
0.15% 
0.00% 
0.63% 
0.09% 
-0.76% 
-0.79% 
1.25% 
-0.29% 
0.26% 
0.16% 
-0.12% 
-0.92% 
-4.10% 
-0.71% 
0.72% 
4.26% 
-0.76% 
0.61 % 
0.20% 
0.33% 
0.43% 
~-0.78% 
-3.55% 
0.17% 
-3.50% 
6.71% 
-0.16% 
0.05% 
0.12% 
0.00% 
Source : DRI Mc Graw Hill / LMC & Polk / AAA / Automotive News / JAMA / JAIA / KAMA 
(*) Percentage change calculated on exact sales figures 
(**) EU manufacturers' figures (sales, % change, market share and point change) for cars & LCVs produced and sold in the EU 15 market only are estimates. 
("*) Market shares are greater for the new passenger car market only (i.e. excluding LCV) 
("") Estimates 
8/07/96 SHEET564.XLS / 5 
3 O 

ISSN 0254-1475 
COM(96) 327 final 
DOCUMENTS 
EN 10 07 15 
Catalogue number : CB-CO-96-352-EN-C 
ISBN 92-78-06885-3 
Office for Official Publications of the European Communities 
L-2985 Luxembourg