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
Date: 1996-07-10
Institutions: European Commission
Subjects: EU industrial policy, competitiveness, industrial research, motor vehicle industry, production

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 

1. 
1.1 
1.2 
1.2.1 
1.2.2 
2. 
2.1 

2.2 

2.3 

3. 
3.1 

3.2 

3.3 

3.4 

3.4.1 

3.4.2 

4. 

investment 

in  the  EU 

fluctuations 

the  business  environment:  the  overall  picture 

The  Development  of Markets  and  Production 
The  Global  Context 
Market  developments 
The  market  for  passenger  cars  and  LCVs 
The  automotive  components  market 
Competitiveness 
The  influence  of  the  business  environment 
Unit  labour  cost 
Energy  costs 
Cost  of  capital 
Currency 
Benchmarking 
Increasing  competitiveness:  Measures  taken  by  industry 
Capital 
Productivity 
Quality 
R&D 
spending 
Results  of  restructuring 
Employment 
Profits 
European  performance  on  major  world  markets  /  Trade  balance 
The  European  Union's  Strategy 
Promoting  intangible  investment 
R&D 
Training 
Ensuring  strong  and  fair  competition 
State  aids 
Vehicle  Distribution 
Foreign  Trade 
Developing  industrial  co-operation 
Internally 
Externally 
Modernising  the  role  of  public  authorities  and 
creating  a  stable  and  beneficial  business  environment 
Ongoing  initiatives  to  complete  the  Internal  Market 
Type-approval 
Car price  differentials 
Taxation  differences 
Safety 
issues 
Environmental 
Transport  policy 
Orientations  for  the future 
Improved  co-ordination  of  regulatory  policies 
The  high  level  panel 
S u m m a ry 

issues 

Page 

2 
2 
4 

5 
5 

7 

9 

10 
10 

12 

15 

* 

16 
16 

19 

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 
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  2 1% of  this  total  compared  to  25% for  US  and  2 3% 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. 

less  than  5  tonnes) 

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 

• 
•  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. 

3 

•  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 

the  Commission  on  how  Europe's  business  environment 

Benchmarking  Europe's  business  environment:  the  overall  picture 
the 
Research  conducted  for 
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: 

in 

European  Strengths 

European  Weaknesses 

O  general  economic  performance 

(also true  for  USA,  Japan,  Korea) 

O  protection  of  intellectual  property 

(legally  also  provided  for  in  Poland) 

•  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) 

O  excellent  transport  infrastructure 

•  high  labour  cost 

(also  offered  by  the  USA,  Japan,  Korea) 

(the  prime  advantage  for  Korea,  Poland) 

O  skilled  labour  availability 

(also  valid  for  Korea,  Japan) 

•  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  S u r v e y^  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  p l a n t s ^.  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. 

incorporating  elements  of 

Realistically, the automotive  sector can no longer be regarded  as a sector of employment  growth. 
But  new  production  concepts 
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. 

C 0 M 9 6 E N 3 D 0 C,  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 
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. 

the  mixed  reactions  of  Member  States 

to 

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  the  field  of  standards  and  technical  regulations, 

In  order  to  promote  co-operation 
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. 

C ar  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  9 3 %.  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 
remain  subjects  of  considerable 
The  production,  use  and  scrappage  of  automobiles 
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 
Technical  measures  include  improved  vehicle  technologies  and 
air  quality  objectives. 
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. 

indirectly, 

in  third  markets.  Given 

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, 
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. 

the  strengthening  of 

that 

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  1 9 9 5^  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 
take 
European  automotive 
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. 

industry,  utilising  cost-benefit 

assessment 

techniques 

to 

COM96EN3.DOC, 9 July,  1996 

Graphs and Tables 

Zj 

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 

G r a ph 2: 

Average Net Present  Values for car  manufacturing  investments 

2500 

2000 

1500 

1000 

500 

! 

0 

i 

-500 

EU  Highest 

USA 

Japan 

EU LowsBT 

-104MECU 

Ik 

Table  1 

Registrations  in  thousand 

Market  shares  : 

New  car  &  LCV  registrations  in the  EU,  USA,  Japan  and  South  Korea. 
REGISTR. 
1994 

REGISTR. 
1993 

REGISTR. 
1995 

CHANGE 
94/93 
{*) 

CHANGE 
95/94 
(*) 

MARKET 
SHARE 
1993 

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 

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 

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 

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 

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% 

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% 

3.6% 

0.2% 

14.9% 
1 2 . 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% 
2 3 . 1% 
2.3% 
0.8% 
100.0% 

31.8% 
17.0% 
1 1 . 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% 

S o u r ce  :  DRI  Mc  G r aw  Hill  /  L MC  &  Polk  /  A AA  /  A u t o m o t i ve  N e ws  /  J A MA  /  J A IA  /  K A MA 

(*)  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) 

MARKET 
SHARE 
1994 

MARKET 
SHARE 
1995 

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% 

3 1 . 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% 

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% 
2 8 . 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% 

S H E E T 5 3 6 . X LS  /  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 

Source : DRI Mc Graw Hill /  Marketing Systems 

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 

WORLD  CAR  & LCV  PRODUCTION  IN 1995(*) 

LATIN  AMERICA 
4% 

SOUTH  KOREA 
5% 

/  EASTERN  EUROPE 

5% 

(*)  Cleared  of  Double  Counti n_9_Z] 

8/07/96 

SHEET580.XLS  /1 

Table  3 
EU  12  TRADE  WITH  EXTRA-EU  (*) 

NEW  PASSENGER  CARS  &  LCVSs 

UNITS 

EXPORTS  TO  EXTRA-EU 

IMPORTS  FROM  EXTRA-EU 

NET  TRADE 

1990 
1991 
1992 
1993 
1994 

Source  : Eurostat  /  Comext 

NEW PASSENGER CARS & LCVSs 

1,816,049 
1,555,041 
1,575,737 
1,760,635 
2,218,438 

1,747,389 
1,944,494 
1,903,710 
1,629,765 
1,420,765 

68,660 
-389,453 
-327,973 
130,870 
797,673 

000 ECU 

EXPORTS  TO  EXTRA-EU 

IMPORTS  FROM  EXTRA-EU 

NET  TRADE 

1990 
1991 
1992 
1993 
1994 

22,069,335 
18,953,146 
19,379,697 
23,014,965 
29,656,735 

Source  : Eurostat  /  Comext 

PARTS & ACCESSORIES FOR MOTOR  VEHICLES  (**) 

11,314,221 
13,731,383 
14,651,404 
1,239,798 
12,377,942 

10,755,114 
5,221,763 
4,728,293 
21,775,167 
17,278,793 

000  ECU 

EXPORTS TO  EXTRA-EU 

IMPORTS  FROM  EXTRA-EU 

NET  TRADE 

1990 
1991 
1992 
1993 
1994 

14,164,033 
14,712,329 
14,808,697 
16,190,565 
18,173,144 

9,981,038 
10,825,793 
12,004,406 
12,467,708 
15,414,109 

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 
1991 
1992 
1993 
1994 

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 

36,233,368 
33,665,475 
34,188,394 
39,205,530 
47,829,879 

21,295,259 
24,557,176 
26,655,810 
13,707,506 
27,792,051 

14,938,109 
9,108,299 
7,532,584 
25,498,024 
20,037,828 

E^ 

^ 1 

jEEg  k i ^P 
T ^ T1 
EEÎM 

5sJ—i 

tsss^ 

=jj|:| 

t. 

H^  5 

Hi 

r~~r i ii 
1 
1993 

1990 

1991 

1992 

H EXPORTS TO EXTRA-EU 
0 IMPORTS FROM EXTRA-EU 
• NET TRADE 

•1 
1 

ill 
4 

1994 

:  Eurostat 

Source 
CI  Note  : Austria,  Sweden  &  Finland  were  not  members  of  the  EU in  1990-1994  and  are  therefore 

/  Comext 

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 

7 2% 
7 7% 
6 7% 
6 4% 
9 2% 
7 4% 
7 2% 
4 4% 
6 3% 

1993 

5 9% 
7 8% 
6 9% 
5 5% 
6 6% 
6 0% 
6 3% 
4 4% 
4 7% 

1 9 95  (p) 

5 4% 
7 4% 
5 9% 
4 6% 
5 9% 
6 0% 
6 8% 
5 0% 
4 4% 

SOURCE :  VDA,  NACE, JAMA,  MMVA,  DRI, National  Associations. 

Ip) preliminary  data 

*  Labour  cost  per  unit  of  gross  value  added. 

1 0 0% 

9 0%  J 

8 0%  -; 

7 0% 

6 0% 

5 0% 

4 0% 

3 0% 

2 0% 

1 0% 

0% 

D 1 9 80 

S 1 9 93 

1 

0 1 9 95  (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 

Italy 

Spain 

Belgium 

Sweden * 

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 

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 

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 

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 

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  3 5 0 0) 

900,000 

800,000 

700,000 

6 0 0 , 0 00 

5 0 0 , 0 00 

4 0 0 , 0 00 

3 0 0 , 0 00 

- a -F 

- • - UK 

I 

E 

B 

SWE 

1 9 80 

1 9 82 

1 9 84 

1986 

1988 

1 9 90 

1992 

1 9 94 

=  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 
MARKET 
REGIST. 
1-III 
95 

SHARE 
1 - III 95 

1-III 
96 

REGIST. 

CHANGE 
% 
n 

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 
TOTAL EU 15 (**") 
JAPAN  ("**) 
TOTAL 

r») 

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 

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 

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 

172.8 
110.4 
38.4 
63.9 
385.6 
0.7 
1.4 
0.0 
387.7 

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% 

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 

Point 

change 

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% 

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