WRITTEN QUESTION E-2999/97 by Graham Mather (PPE) to the Commission (1 October 1997)

Subject: New car price discrepancies between Member States

A recent edition of the BBC consumer affairs television programme 'Watchdog' brought to the attention of millions of UK consumers that they could purchase new cars at a cost several thousand pounds cheaper in countries such as Belgium and the Netherlands than in the UK. For example, a Rover 214Si retails at £12 640 in the UK, yet only the equivalent of £9,570 in Belgium (75.7% of the UK price). Such discrepancies clearly cannot simply be attributed to the current strength of sterling.

1. What facilities does the Commission have in place to monitor these discrepancies?

2. What factors lie behind the discrepancies, and to what extent does each of these factors figure?

3. What action is the Commission taking to redress these price discrepancies and thus ensure the homogeneity of the Single Market for the vehicle retail sector?

Answer given by Mr Van Miert on behalf of the Commission (24 October 1997)

1. Since 1993, the Commission has been monitoring car price differences in the Community in its twice-yearly report on car prices ((See for the most recent one IP/97/640 of 11.7.1997, but also IP/96/722 of 29.7.1996 and IP/96/145 of 15.2.1996 press releases. )). This publication is based on the recommended retail prices for the best-selling models across the Community, which the manufacturers submit on 1 May and 1 November to the Commission.

2. An analysis of the figures in the current report (1 May 1997) shows that the growing price discrepancies registered in 1996 and 1997 have, in fact, been due mainly to the strength of the British currency, rather than to changes in recommmended list prices. Incidentally, a similar situation of increasing price differentials was caused by the devaluation of the Italian currency in 1995 ((IP/95/768 of 24.7.1995. )). In addition, the Commission has found ((IP/97/113 of 14.2.1997. )) that pricing policies pursued by manufacturers in the individual Member States take into account taxes to be paid on car purchase. In Member States with high taxes, list prices tend to be lower than in those with no particular tax on car purchase, such as the United Kingdom. Finally, manufacturers decide their list prices according to economic considerations, such as demand patterns and market strategies.

3. The Commission does not intervene in the pricing policies of car manufacturers, except in cases of infringement of European competition rules. It has, however, underlined the necessity of introducing the euro as soon as possible ((IP/97/640 of 11.7.1997. )). It considers that this is the most efficient way to avoid the monetary fluctuations which are one of the causes for price discrepancies incompatible with the idea and the principles of a common market. The introduction of the euro should also help ensure that prices are determined solely by economic factors. Member States, that are not yet part of the uro-area, can join the new exchange rate mechanism (ERM2), which will contribute to a reduction in exchange rate fluctuations against the uro.

Finally, a growing price transparency, which the Commission's car price reports help to promote, is encouraging customers to acquire their vehicles in those Member States where prices and other sales conditions are most favourable. The tendency to do so is increasingly evident in the United Kingdom. This freedom, as assured by the provisions of the group exemption Regulation on motor vehicle distribution ((Commission Regulation (EC) No 1475/95 of 28.6.1995 on motor vehicle distribution; OJ L 145, 29.6.1995. )), is an important market-related factor contributing to harmonization of prices across the Community. In this context, also the Community type approval for new vehicles may be mentioned, as it presents an important accompanying measure facilitating re-exports by final consumers.