Source: EURLEX
Language: en
Format: md

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 10.07.1996
COM(96) 327 final

COMMUNICATION FROM THE COMMISSION

TO THE COUNCIL, THE EUROPEAN PARLIAMENT,

THE ECONOMIC AND SOCIAL COMMITTEE

AND THE COMMITTEE OF THE REGIONS

**EUROPEAN**

**AUTOMOBILE INDUSTRY**

1996

**1996 Communication on the Automobile Industry**

Page

1. The Development of Markets and Production 2

_**1.1**_ _**The Global Context**_ _**2**_

_**1.2**_ _**Market developments in the EU**_ _**4**_
_1.2.1_ _The market for passenger cars and LCVs_
_1.2.2_ _The automotive components market_
2. Competitiveness 5
_**2.1**_ _**The influence of the business environment**_ **5**

_Unit labour cost_

_Energy costs_
_Cost of capital_
_Currency_ _fluctuations_
_Benchmarking the business environment: the overall picture_
_**2.2**_ _**Increasing competitiveness: Measures taken by industry**_ _7_
_Capital_ _investment_

_Productivity_

_Quality_
_R&D_ _spending_
_**2.3**_ _**Results of restructuring**_ _9_
_Employment_
_Profits_
_European performance on major world markets / Trade balance_
3. The European Union's Strategy 10
3.1 Promoting intangible investment 10

_R&D_

_Training_
3.2 Ensuring strong and fair competition 12

_State aids_

_Vehicle_ _Distribution_

_Foreign Trade_
3.3 Developing industrial co-operation 15
_Internally_
_Externally_
3.4 Modernising the role of public authorities and
creating a stable and beneficial business environment     - 16
_**3.4.1**_ _**Ongoing initiatives to complete the Internal Market**_ _**16**_
_Type-approval_
_Car price_ _differentials_
_Taxation_ _differences_
_Safety issues_

_Environmental_ _issues_

_Transport policy_
_**3.4.2**_ _**Orientations for the future**_ _**19**_
_Improved co-ordination of regulatory policies_

_The high level panel_
4. Summary 22

COM96EN6 DOC, 9 July. 1996

**Introduction**

On the basis of the Commission's last Communication on the automobile industry of February
1994 [1], the Council adopted a Resolution on the automobile industry in May 1994 [2] . 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 Parliament [3] and the Economic and Social Committee [4], who both adopted resolutions
on the industry. The following document has been prepared by the Commission in order to
respond to the Council's request and to the proposals originating from the discussions that

followed in the Parliament and the Economic and Social Committee.

**I.** **The** **Development** **of** **Markets** **and** **Production**

**1.1** **The Global Context**

World automobile production (cars and light commercial vehicles less than 5 tonnes) is

estimated to have reached 47.7 million units in 1995 an increase of 0.8 million units over 1994.

Production in the Union accounted for about 29% of the total, an increase of two percentage
points compared to the 1994/93 average. US automobile producers accounted for 24% and
Japanese producers 21% of this total compared to 25% for US and 23% for Japanese production
in 1994/93. Automobile production in the most important new manufacturing countries-* reached
a total of 7 million units in 1995, 15% of the total world production. Of this South Korea
represented 35%, reflecting an ambitious programme to transform the South Korean car
industry, which is already the world's sixth biggest, into the fourth largest by the year 2000.

The globalisation of the world automobile industry is now proceeding at a very fast pace and is
affecting progressively all the corporate activities of European manufacturers and suppliers.
Reflecting the change in the location of future growth virtually all European manufacturers have
now adopted global strategies consisting of achieving a world wide sales and production base
spread around traditional and newly emerging growth markets. West European producers'
production of vehicles outside the EU represents today 20% of total "European" production.
This percentage is expected to increase in the future reflecting faster growth outside Europe and
possibly some production relocation. The USA and the growth markets of Asia and Latin
America have attracted investments by EU manufacturers in recent years. [6 ]

Sourcing and investments are to some extent being relocated from relatively high cost locations
within the EU to low cost locations inside or outside the Union, notably to Central and Eastern
Europe. From the EU automotive industry's point of view, the opening of the East represents
both an opportunity and a challenge: _»_

>COM(94)49 final
2 OJ94/C149/01
3 PE211.149/fin.
4 CES 1071/94
5 Argentina, Mexico, Brazil, Korea, India, Thailand, Taiwan, China
6 To cite some examples:

- Mercedes Benz and BMW have invested in production sites in the United States;

- China has been selected as a production location by PSA/Citroen and Volkswagen/Audi, with
others trying to follow suit;

- Fiat, Ford, GM, Mercedes-Benz,, Peugeot and Rover have entered into joint Ventures with
Indian partners for the production/assembly of cars; BMW and Volkswagen are about to do

so;
important new investments have been announced in Brazil where European manufacturers
have traditionally had a strong presence: Fiat, Ford, GM, Mercedes, Renault and Volkswagen
have announced further investments by the year 2000.

COM96EN3DOC, 9 July, 1996

                                                                - 3

 - An opportunity, as the Central and Eastern European countries, with their growth potential
for vehicle sales and a good level of technical qualification and relatively low labour costs,
offer favourable prospects for exports and attractive conditions for local
assembly/production. Many EU manufacturers (Fiat, Ford, GM/Opel, Renault, Rover and
Volkswagen) have already taken the opportunity and established joint ventures with
Central/Eastern European partners or invested in greenfield production.

 - A challenge, because, following the building-up of production capacity in Central/Eastern
Europe by their competitors from Korea and Japan (notably Daewoo in Poland, Romania and
the Czech Republic, Suzuki in Hungary) EU manufacturers will face increasing competition
on their home market at a time when growth prospects on this market are limited and the
industry is undergoing major restructuring.

A relocation of some production to Central and Eastern Europe will have a direct impact on
employment. On the other hand, investments aimed at exploiting new markets and regions can
help to support the European employment base, e.g. through an improved spreading of currency
risks and increased demand for automotive parts that have been produced in the EU. This point
of view has also been accepted and put forward by the responsible trade union representation at
European level, the European Metal Workers Association.

In terms of market size the combined US, EU and Japanese markets still represent more than
70% of world sales. Encouragingly, European producers have improved their performance on all
three of these markets in the last two years7. However, major future growth opportunities will
come not from the traditional markets of Western Europe, USA and Japan which are tending to
level off, but in new growth areas notably China, South East Asia, India, Latin America and
Eastern Europe. The European market is therefore not sufficient to ensure long term viability.
This does not mean of course that European sales are of secondary importance; on the contrary
most European companies will continue to rely on the European single market as underpinning
their entire operations and as a basis for expansion.

Graph 1 of the annex shows the worlds' major automobile manufacturers by production output.
Compared to the situation ten years ago, some companies that would have featured on a similar
chart made then, like Jaguar, Rover and Saab, have not succeeded in remaining independently
competitive with their relatively low production levels. In April 1996, Ford of the USA has
taken the control of the Japanese car manufacturer Mazda, indicating that this trend is continuing
and that the formerly closed Japanese economy is now becoming more open not only for imports
of foreign cars but also for foreign direct investment. In the meantime, South Korean companies
have emerged and built up considerable capacities. Furthermore, the major South Korean
manufacturers have announced plans to increase production to over 5m units per annum by the
end of the century. While much of this increased production will be targeted at Asian Pacific
markets it can be expected to contribute to an intensification of competitive pressure in Europe.
In Europe, pressures for co-operative ventures and collaboration are increasingly hging felt.
Many of Europe's manufacturers have entered into joint venture production agreements, e.g. the
Ford/VW and Fiat/PSA MPV (multi purpose vehicle) projects. The Volvo/Mitsubishi
arrangement to produce two different car models on the same production line in the Netherlands
is especially significant because it will produce one of Volvo's core models, rather than the niche
models that have typically been the result of other manufacturers' joint ventures. At the same
time, the Japanese transplants have become more integrated into the European economy by
extending their European supplier base and raising local content levels.

Capacity utilisation in Europe was below 80%) for most of the European high volume
manufacturers in 1993 and has not risen above this critical level since8. The existing structural
overcapacity needs to be seen in the context of the successful policy of manufacturers to reduce

7
see chapter on competitiveness
8 Capacity 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

9
LCVs = light commercial vehicles with less than 5 tonnes

10 Sources: 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)

12
more details: see table (annex)
13 Cars 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
18 See table 4 of the statistical annex

COM96EN3 DOC, 9 July, 1996

6

initiatives by the social partners to develop more flexible worktime models in order to make
better use of production equipment and to take shifts in demand into account.

**Energy costs**
Energy represent a primary input of all manufacturing industries. While prices on the gas market
have converged across Europe, at a level close to that of the United States, electricity prices have
not. High costs for electricity affect European producers. Compared to lower US prices, the EU
automotive industry is suffering from a 25%) costs disadvantage. Competition is very limited in
the European electricity market, as markets are highly imperfect, and in the majority of cases
closed to competition. Preliminary studies on the impact of the Single Energy Market have
estimated a potential reduction of electricity prices of 8%> in the EU. This amounts to ECU 5.8bn
per annum, and covers only direct price reductions arising from increased competition. The
recent agreement in the Energy Council on opening the European electricity market will have a
positive effect on reducing costs.

**Cost of capital**
The cost of capital is usually measured in terms of the cost of debt and equity. Although it is
very difficult to quantify to what extent the cost of capital has influenced the performance of the
European automotive industry, it is possible to identify economic policies that should be pursued
to lower the cost of capital. In the 1990s, the average measured long-term real interest rate in the
EUR15 has been slightly higher than in Japan and in the United States. Regulatory and market
access restrictions that increase the cost of using certain financial instruments in Europe could be
modified. Some of these instruments are cheaper and very successful in other parts of the world.
Inflation risk premia can also be important, which underlines the importance of the budgetary
policies that are currently being pursued by Member State government in order to meet the
Maastricht criteria.

The cost of equity for many of Europe's listed companies is also higher than it needs to be.
Differing accounting standards, a lack of knowledge about shareholders rights in certain
Member States and less stringent reporting requirements internationally, artificially raise the
cost of equity for European companies. The Union therefore actively promotes the development
of reputable and widely recognised reporting standards via the International Accounting
Standards Committee (IASC).

**Currency fluctuations**
While the appreciation of the Yen has helped European industry to compete on world and
domestic markets, currency fluctuations between Member State currencies have significantly
affected the financial performance of European automobile manufacturers. As has been
described by the Commission in the Communication on the impact of monetary fluctuations on
the Internal Market (COM95/503 final), during the last period of currency instability,
automobile manufacturers exporting from countries with an appreciating currency faw their
profit margins and exports to Member States with a depreciating currency reduced. On the other
hand, companies exporting from Member States with depreciating currencies (Italy, UK, Spain),
although unable to capture a significantly larger share of the EU automobile market, nonetheless
saw their profit margins increase.

In order to abolish the distortions created by these monetary fluctuations (e.g. heterogenous
pricing policies, déstabilisation of the distribution network especially in the case of dealers
located near frontiers, distorted location and sourcing decisions by automotive companies), it is
important for the competitiveness of European industry that the Union adopts a single currency
within the time-scale provided for in the Treaty (on 1 January 1999). This step, combined with
the measures that will be taken to ensure economic convergence and monetary stability both
within the EURO Zone and between the EURO and the other European currencies, will help to
reduce uncertainty, transaction costs and to improve the functioning of the Internal Market.
Furthermore, it will also help the EU automotive industry to improve its competitiveness.

COM96EN3 DOC. 9 July, 1996

**7**

**Benchmarking Europe's business environment: the overall picture**

Research conducted for the Commission on how Europe's business environment in the
automobile sector compares with those of its major competitors shows that there are significant
variations among the countries selected for review (USA, Japan, South Korea, Poland, Italy,
France, Germany and the UK). In **a** first step, the countries were benchmarked on absolute
criteria (e.g. availability of skilled labour, infrastructure etc.). Here, the EU-4 countries showed a
number of strengths leading to the statement that the European business environment for motor
vehicle manufacturing investment can be regarded as generally positive. The main strengths and

weaknesses are:

**European Strengths**

O general economic performance
(also true for USA, Japan, Korea)

O protection of intellectual property
(legally also provided for in Poland)
O excellent transport infrastructure
(also offered by the USA, Japan, Korea)
O skilled labour availability
(also valid for Korea, Japan)

**European Weaknesses**

- time to obtain building, operating
and environmental permits
(much shorter in the USA, Japan, Korea)

- high corporate income tax rates
(much lower in the USA, Korea)

- high labour cost

(the prime advantage for Korea, Poland)

- lack of work time flexibility
(advantage for the USA, Japan, Korea)

The transformation of these strengths and weaknesses into monetary terms, that is being
performed in the second part of the study, shows that there are apparent weaknesses on the
European side.

The assessment is is based on the calculation of the Net Present Value of an investment (the

establishing of the same, state-of-the-art, lean and efficient car plant) in all the different business
environments mentioned above. Under given assumptions the results showed that the most
profitable location to set up car production would be South Korea, due to a very positive relation
between cost and qualitative aspects (infrastructure, administrative efficiency). According to the
study, good Net Present Values for the amount of money invested could also be expected in the
UK, Poland, and France, whilst other European countries and Japan would be in a less
favourable position. [19 ]

In order to constantly measure the competitiveness of European industry and to compare it to its
international counterparts, the Commission is also developing a specific data base in cooperation 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 industry [20] 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.

19
see graph 2
20 excluding 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 trends [23] are similar in many ways to those for productivity. The data used stems from an
Initial Quality Survey^ conducted annually in the USA and has been adjusted to reflect only
defects that are directly related to assembly plants. The dominant trend is clearly convergence
towards quality levels in the range of 60 defects per 100 vehicles, with the exception of the
group of plants from the newly industrialising countries whose quality worsened over the survey
period. The greatest improvement is again shown by European plants^. The quality of the
products of the industrialising countries group has slightly deteriorated between 1989 and
1993/4, which, is primarily attributable to a period of labour conflict in the Korean industry and
an explosion of Korean domestic demand which has placed a premium on high volume
production. Korean auto makers are already showing signs of returning to more competitive
levels of quality, although they still lag behind the other regional groupings.

**Research** & **development spending**
The European Automobile industry (excluding suppliers) has increased R&D expenditure from
ECU 6.2bn in 1989 to ECU 8.3bn in 1994. Even during the economic downturn in 1993, high*
R&D spending has been maintained. R&D expenditure has resulted in some very successful
innovations of motor vehicle technology, e.g. airbags and ABS, which were first developed in
Europe and are now being used world-wide. Weaknesses remain, however, notably concerning
the ability to transform R&D results into successful products.

2 'Source: International Motor Vehicle Programme (IMVP) of the MIT
22 For 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.
23 Source: 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.
25 This 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 Europe [26] as measured by EUROSTAT in its
NACE 3500 category (Motor Vehicles and Parts) has decreased from 2.2 million in 1980 to 1.6
million in 1994. This is a reduction of almost 30%> of the workforce. Since there is considerable

competitive pressure on the industry to reduce costs, further reduction is to be expected.

Employment in motor vehicle manufacturing alone has gone down from 960,000 in 1993 to
921,800 in 1994. For 1995, reductions to 912,000 have been announced.^? Employment in the
European automobile components sector contracted by 8%> in 1993 and by _5%_ in 1994,
indicating a downward trend which is significantly less severe than predicted by the widely
quoted Boston Consulting Group study of 1993.

Looking at total employment in the sector (NACE 3500) on a Member State level, the trend of
workforce reduction is evident in all major car producing countries.28 The temporary exception
to the rule is Germany, were employment in the automotive sector had been increasing from
1980 until 1989. After German reunification, employment figures have first risen abruptly,
taking account of additional Eastern demand and the additional workforce. Since 1991,
employment has gone down more steeply than in other EU Member States. Figures for 1994,
including the Neue Lander (former GDR), are well below the number of employees in 1980.

Realistically, the automotive sector can no longer be regarded as a sector of employment growth.
But new production concepts incorporating elements of lean production, continuous
improvement, total quality management, teamwork and outsourcing must not necessarily lead to
less employment than traditional ones. Companies employing creative work time models, e.g.
VW at its Wolfsburg site, have managed to keep their staff employed even in times of crisis.
Tasks requiring know how are more likely to continue to be carried out in the traditional
locations than tasks that can be transferred more easily. There is also increasing evidence that
some past automation investments could have been used more profitably if they had been spent
on human resources development. While state-of-the-art production technology is vital to ensure
the future of the industry, the focus of attention is now shifting increasingly towards the
employees, whose interest in more stimulating tasks, higher qualifications and a positive work
environment should be addressed to achieve higher levels of flexibility, productivity and quality.
The dialogue between the social partners at plant, national and European level has an important
role to play in this context.

**Profits**

Following declines in profits over the previous three years, European automotive firms incurred
net losses of a total of ECU 2.5bn29 j n 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.

26 Taking 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.
27 Figures based on a survey carried out by the Commission recently
28 See statistical annex
28 COM (93)700 final
29 Source: 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 cooperation 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

30 3% 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&D [33] . For example, the Industrial and
Materials Technologies (BRITE/EURAM III) programme has supported more than 30 specific
projects [34] 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, ESPRIT [36] 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

32 At 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
33 EUCAR - European Council for Automotive R&D, Master Plan, 6 June 1994
34 IMT (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
j5 COM (95) 601 / see chapter on transport policy
36 ESPRIT projects notably concern: Technologies for Components and Subsystems, High Performance
Computing, Networking and Integration in Manufacturing, the Open Microprocessor Initiative.

C0M96EN3D0C, 9 July, 1996

12

the design of innovative and transnational training material for the automotive industry and
LEONARDO will build upon this experience. The automobile industry, having always been a
leading sector regarding the development and implementation of new forms of organisation and
production systems (e.g. lean production), is also setting standards when it comes to training and
retraining. For this reason, in the last Communication on the European Union Automobile
Industry of February 1994, the European Commission announced its intention to create a
transnational training network for the automotive industry within the framework of the FORCE

programme.

This temporary network resulted in the definition of 53 model projects under three headings:

- Training for new work structures

- Training for co-makership (Manufacturer /Supplier relations)

- Learning while working / on-the-job training

Precisely because the number of companies undertaking increased training and organisational
development initiatives is continually increasing, and the trend is now towards an industry with
better trained employees rather than more and more automatisation, there appear?' to be a
growing need for the exchange of information, experience, and training material. It is hoped that
the European network of training projects, that is now being developed by the automotive
industry associations ACEA and CLEPA as a follow-up to the initiative described above, can
serve as a clearing house for the exchange of information and as the starting point for common
training approaches of the industry.

3.2 Ensuring strong and fair competition

Ensuring that strong competition prevails in the Union's market is an essential plank of industrial
policy applied in this sector. Three main aspects of that policy need to be highlighted:

**State Aid**

The Commission has continued to apply the Framework on State Aid in the motor vehicle
industry which was reintroduced in January 1996 and remains valid until end 1997. This
framework ensures that aid granted on the basis of approved aid schemes to projects at a cost of
more than 17 MECU are notified and that they are examined to ensure coherence with the
Framework. Most large scale state support in this sector is given in the form of regional aids
which are subject to a particular examination aimed at identifying if the aid is in proportion to
the regional and structural handicaps incurred by new investments compared to costs that would
have been incurred in a more central zone in the Union. This methodology has served the
Commission well in the past and has ensured that investments with state aids have been
examined on a comparable and fair basis which weighs up regional policy considerations against
the risk of distortions in competition resulting from state aids, it is acknowledged that the
Framework also has its limitations. In this context it should be noted that the cdSt-benefit

analysis undertaken are very detailed exercises dependent on the verification of company data by
independent outside consultants based in part on forecast and estimation. The Commission has
recently tested the possibility of introducing a horizontal framework by which regional aid to
large investment projects in any industry is assessed according to a uniform set of transparent,
simple and predictable criteria. Given the mixed reactions of Member States to the
Commission's subsequent proposals for such a horizontal system, it is uncertain whether the
Commission will adopt such an intersectoral framework which might replace the different
sectoral frameworks that currently exist. In any case, the Commission has planned a review of
the motor vehicle framework later this year and, to that effect, demanded an independent study
on the effectiveness of the framework and on possible modifications which might be necessary.

COM96EN3.DOC, 9 July, 1996

**13**

**Vehicle distribution**

Regulation 123/85 on the selective and exclusive distribution of cars was renewed with
important changes from October 1995 by Regulation 1475/95-37, which is valid for 7 years. The
changes introduced are aimed at ensuring more competition at the level of distribution, a better
functioning of the internal market and a balance between the interests of all the parties
concerned.

The most important change relates to the introduction of the possibility for distributors to sell
other vehicle brands under certain conditions ("multifranchising"), which include the need to
ensure that sales are carried out in different premises, with separate management, without risk of
confusing brands. In addition it is now also possible for a distributor to service different car
brands. The new Regulation also provides for intervention by an arbitrator or an independent
expert in case of conflict between distributor and manufacturer. Abuses of the Regulation are
now subject to clearly enumerated sanctions which include withdrawal of the exemption in
certain cases.

The changes introduced by the Commission in the Regulation coupled with the evolution of
market forces are likely to lead to a further concentration in the field of distribution by the
increase in the average size of distributorships and an increase in multifranchising. The
increasing sophistication of vehicles, notably their engine management systems as well as
complex control systems to reduce pollution will require distributors to invest in expensive
diagnostic equipment, a factor which again favours the larger dealer.

**External relations**

With regard to domestic policy towards Japanese imports, the Union's policy consists of
ensuring that the arrangement with Japan (the "Elements of Consensus") continues to be applied
in all its elements. Under this arrangement Japan's exports of cars and light commercial vehicles
to the Union and to the five formerly restricted markets™ are monitored on an annual basis until
end 1999. The arrangement has functioned satisfactorily so far and has contributed in an
important way to creating conditions favourable to facilitating the industry's restructuring
process. In 1995, Japanese exports are estimated to have attained the level of less than 800,000
units, some 250,000 vehicles below the agreed monitoring level. Weak markets in Europe, the
rise of the Yen and the improved competitiveness of European industry collectively explain this
situation. At the same time as mentioned earlier transplant production is increasing, in line with
forecasts, and is to some extent replacing Japanese exports. There has been no market disruption
in the European market on account of Japanese sales.

Externally, the Commission's policy is to promote equality of market access opportunities in the
context of bilateral and multilateral trade negotiations and to encourage deregulation in order to
lessen the regulatory burden on manufacturers. In 1995 particular emphasis was placed*en Japan
and Korea.

With respect to improving market access to the Japanese market the Commission has
concentrated its efforts in the field of deregulation, the area identified by the European industry
as having the greatest impact on its business. In June 1995, an agreement was reached with
Japan on a series of measures in the regulatory sphere under which Japan on the one hand
accepted that most tests necessary to meet Japanese automobile requirements could be
undertaken in Europe and on the other hand agreed to eliminate, simplify and/or rationalise a
number of specific Japanese requirements which add unnecessary costs to vehicles. In addition
Japan agreed to adhere to the UN-ECE 1958 Agreement on the Mutual Recognition of
Approvals in the field of motor vehicle equipment and parts. This is an extremely important
commitment by Japan which will reinforce the international harmonisation process carried out

"Reference O.J.L 145/1995
38 France, 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 USJapan 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 countries [39],
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.

39 See para. IÏ.7 of Council Resolution of 16 May 1994 on the Automobile Industry (OJ CI 49/94)

C0M96EN3 DOC, 9 July, 1996

15

Foreign trade in automobiles can be facilitated if vehicles and components are produced
according to internationally recognised product regulations. The Union and its Member States
have always been at the forefront of this effort through their active support for the work
undertaken at Working Party 29 of the UN-ECE, the body responsible for the implementation of
the 1958 Agreement on mutual recognition. Two major initiatives are underway to reinforce this
effort. On the one hand the Community must become a Member of the revised Agreement
thereby solidifying the close link that already exists between EU Directives and UN-ECE
Regulations in the motor vehicle area. To this end the Commission adopted a proposal to the
Council in January 1996, which must also be given approval by the Parliament, authorising the
Community's adherence to the Agreement. It is essential that this process be accomplished as
quickly as possible, the more so as the European type approval system is now mandatory for new
vehicle types and that certifications to UN-ECE Regulations are an alternative means to meeting
the prescriptions of Community directives. The Commission considers that full safeguards are
contained in the proposals for the Community's accession to UN-ECE agreement to ensure that
the respective competences of the Commission, the Council and the European Parliament are
fully safeguarded.

At the same time it has to be recognised that this recently revised Agreement must be further
developed in order to encourage the participation of more countries, notably the US, Korea,
China, India and other new automobile producing states. Contacts are therefore taking place
with a view to identifying additional changes that may be necessary. Industry led pressure for the
international harmonisation of automobile regulations and certification procedures is growing,
forcing regulators to accelerate work in this area. This is reflected in the conference on
international regulatory harmonisation within the framework of the Trans Atlantic Business
Dialogue organised in April 1996 in Washington, at which US and European industries drew up
joint proposals on how to achieve harmonisation of emission, safety and certification procedures
for consideration by governments and other interested parties. A detailed comparison of the
differences between EU and US regulations is now being undertaken by the EU and US
automobile industries. On the basis of this work the EU and the US will have to decide which

path is the appropriate one to achieve the global convergence of regulations and progress
towards international harmonisation.

3.3 Developing industrial co-operation

**Within the** EU, the Commission has encouraged the automotive components sector in particular
to seek transnational collaboration» with the vehicle manufacturers and with each other, mainly
with a view to promoting their increased participation in R&D and training programmes. In
November 1994, VETIS, the first European buyers exhibition for the automotive sector, was
held in Turin in order to promote transnational co-operation. At this event, 530 suppliers had
more than 7000 business meetings with purchasing teams from over 50 vehicle manufacturers
and system suppliers. A second VETIS will be held in November 1996.

On the **external side,** the Commission has sought to reinforce the presence of the European
automotive industry on promising and emerging markets. Priorities for co-operation in the
coming years will be Japan, Korea, China, India, Eastern Europe and Turkey. Between the EU
on the one side and Korea, China and India on the other side Automotive Business Fora have
already taken place with the support of the Commission. In February 1996 a European
automotive supplier mission to Detroit, aimed at stimulating co-operation between EU and US
suppliers, was supported by the Commission.

With a view to **European-Japanese co-operation,** the Commission will continue to support
JAMA-CLEPA "Design-in" business conferences to promote business relations between
Japanese vehicle manufacturers and European automotive component suppliers. The first one in
Paris was held on 6/7 March 1995 and brought together 11 manufactures from Japan and 80
component makers from 9 EU member states. There were 240 face-to-face meetings between

C0M96EN3 DOC, 9 July, 1996

16

European suppliers and Japanese purchasing teams at this event. A second event modelled on the
same lines took place in Berlin in May 1996, and a third meeting is already scheduled In the UK

for 1997.

In order to promote co-operation in the field of standards and technical regulations, the
Commission, in co-operation with the European automotive industry, established a dialogue on
regulatory issues with China and India. This was continued during a Standards Seminar which
took place on the occasion of the 3rd EU-China Automotive Business Forum in Beijing in June
1996 and involved representatives of the Commission, the European automobile industry and
Chinese governmental authorities responsible for the development and implementation of safety
and emission standards. As a follow-up to a Standards Seminar held in New Delhi in February
1996 at the EU-India Automotive Business Forum, the Commission will continue discussions

with a joint Government/industry delegation from India who will come to Europe in late 1996.

3.4 Modernising the role of public authorities and
creating a stable and beneficial business environment

3.4.1 Ongoing initiatives to complete the Internal Market

**Type-Approval**
The EC Whole Vehicle Type-Approval system has been built up over a period of 25 years. In
1996 an important benchmark was reached with the implementation on a mandatory basis of
European whole vehicle type approval for new types of cars* [0] . With effect from this date
national approvals are no longer permitted for new types. Prior to 1996 the system had been
extensively deployed by manufacturers on an optional basis (up to September 1995, for example,
213 Whole Vehicle Type Approvals and extension of such approvals had been reported to the
Commission).

The type approval system will become mandatory for all new cars in 1998. With respect to other
vehicles - goods vehicles, buses and coaches - two pieces of legislation are missing, thereby
preventing the implementation of a whole vehicle type approval system for these vehicles. The

draft directive on masses and dimensions is still under discussion in the Council whilst on buses

and coaches a directive on the specific safety prescriptions of such vehicles will be adopted by
the Commission shortly.

At the same time, serious reflection needs to be given to ways in which the adaptation of motor
vehicles to technical progress could be better accomplished. There is currently an enormous
backlog of requests by Member States and interested parties for technical adaptations that are
quite beyond the resources of the Commission services to satisfy. Strict and limited priorities
need to be drawn up which reflect consensus on the most pressing needs in the safety and
environmental fields. For 1996 these include inter alia the need for a directive introducing UNECE Regulation 44 on child seats.

New efforts need to be made also to harmonise car registration procedures which continue to act
as an obstacle to the smooth functioning of the type approval system.

Car **price differentials**
Price levels for automobiles have long been the subject of detailed attention - it being assumed
that discrepancies in prices should trigger cross-border shopping as individuals or intermediaries
attempt to take advantage of large potential savings. The persistence of price dispersion is often
quoted as circumstantial evidence that the Internal Market is not working as well as it should,
and that there are obstacles to consumer arbitrage in this market. Detailed analysis of price
dispersion for similar car models across Member States has highlighted a number of factors
which drive wedges between prices quoted in different Member States. The setting of different

40 Applies to Ml type vehicles

COM96EN3 DOC, 9 July. 1996

17

prices in different Member States can be considered as a rational response of a producer when
faced with the existence of national producers who, for historical reasons, act as price leader and
price to their local market, or consumer differences - particularly, a preference for national
marks which acts as a constraint on the pricing strategy of rival companies.
However, there are policy distortions which do undermine the smooth functioning of the Internal

Market in this sector.

exchange rate volatility: In 1993, for 64% of models, net price differences (excl. taxes)
were more than 20% between cheapest and most expensive country. By 1995, this figure had
reached 93%. The countries which had depreciated most over the intervening period, were
systematically those where prices were lowest in 1995. Further evidence on the impact of
exchange rate instability can be obtained by comparing price differentials between countries
whose currencies remained stable and those where they depreciated. Differentials between car
prices in the former group are low and continue to decline. Much of the dispersion (and volatility
of dispersion) is accounted for by countries whose currencies have been depreciating.

substantial differences in vehicle taxes in force in different Member States: High levels
of taxation require producers/retailers to lower their pre-tax prices in these markets in..order to
maintain sales. Purchasers in partner countries, who are entitled to purchase vehicles free of
taxes (taxes have to be paid in the country of registration) might be attracted by these lower pretax prices. Analysis carried out in the context of the assessment of the impact and effectiveness
of the Internal Market programme suggests that dealers in frontier regions bordering countries
with low pre-tax prices are forced to lower prices in order to maintain turnover. This suggests
both that cross-border shopping does constrain pricing, but more importantly that disparities in
sales/purchase taxes distort prices in a manner which is injurious to dealers and producers.

The Commission is attentive to complaints concerning difficulties experienced by consumers
who have purchased cars in another Member State in respect of registration of their vehicle. To
this end, an interpretative document on administrative treatment of cross-border purchases has
been published (OJ 96/C 143/04).

**Taxation differences**

In its last report on the situation of the automobile industry the European Parliament has noted
that taxation levels for the purchase an average 2000 cc car vary at the moment between 15% in
Germany and over 200% in Denmark. [41] Since large tax differentials across the Union can distort
competition and notably endanger the existence of car dealers in border regions, the Parliament
has called on the Commission to complete the single market by putting forward proposals to
harmonise taxes related to the purchase, registration and use of the car. The Commission has
already taken action towards tax harmonisation: the introduction of minimum VAT levels in
1993 was also linked to the abolition of excessively high VAT rates for car purchases in some
member states. In addition, the Commission has commenced a comprehensive review of the
different types of taxation applied to vehicles in different Member States to examine whether
there is need for further approximation of such taxes for internal market reasons. The review will
also assess what other Community policies could be advanced by initiatives in this area.

**Safety issues**
Important initiatives, leading to enhanced safety of vehicle occupants, are underway in the
following areas:

Protection of passengers against frontal impacts

A new Council and Parliament directive is currently under discussion and is expected to be
adopted later this year. Applicable to passenger cars, it sets out an up-to-date frontal impact test
procedure which is representative of real accidents. The Directive will be mandatory for the
approval of new designs after 1 October 1998.

4, PE211.149/fin.

COM96EN3 DOC, 9 July, 1996

Protection of passengers against side impacts

A new Council and Parliament directive has been adopted and will enter into force later this
year. Applicable to passenger cars and car-derived vans, it introduces requirements for side
impact protection for the first time. It will be mandatory for new vehicle designs after 1 October
1998.

Bus and coach seat belts

The Commission **has** adopted amendments to three directives which will introduce requirements
for 3-point belts in all minibus seats and 2-point belts, together with energy-absorbing seats, for
coaches. The adoption of these measures became possible following the positive opinion given
by the Regulatory Committee of Member States in April 1996 and ensures that the first phase of
the "integrated approach" to improving bus and coach safety announced by Commissioner
Bangemann in March 1994 has been completed.

Bus and coach construction directive

A proposal for a new Council and Parliament directive (the second phase of the "integrated"
approach) is expected to be published shortly. It will set out technical requirements for roll-over
protection, stability and other safety features such as number of exits. Once adopted, this
directive will allow complete vehicles to obtain EU type-approval for the first time, to the
benefit of the internal market.

Other measures to enhance road safety

In order to improve safety on European roads and especially for pedestrians, it is also important
that complementary national and local measures like improvements of the infrastructure, traffic
management and better driver education are pursued actively.

**Environmental issues**

The production, use and scrappage of automobiles remain subjects of considerable
environmental concern. The Commission is undertaking a series of initiatives in all these areas.
The need to control noxious pollutant emissions is long-standing and work is advanced in the
Commission on proposals to reduce vehicle emissions further from the year 2000. New
proposals for car emission reductions have been adopted by the Commission on 18 June 1996.
They will be followed shortly thereafter by proposals on light commercial vehicles and diesel
engines of heavy goods vehicles. These measures, as well as measures to improve fuel quality,
will be based on the results of the Auto-Oil programme, a unique collaboration between the
Commission and the automobile and petroleum industries aimed at providing a sound data base
for future measures. In accordance with the principles laid down in Article 4 of Directive 94/12,
the last car emissions directive, the objective is to determine the most cost-effective combination
of measures - technical and non-technical - susceptible to reduce emissions in accordance with
air quality objectives. Technical measures include improved vehicle technologies and
reformulated fuels, and better in use inspection and maintenance. Non-technical measures
include such measures as the support to public transport, scrappage schemes and road pricing.
Analysis is also taking place examining the extent to which technical standards could be
complemented by economic instruments and fiscal incentives without damaging the internal
market.

In addition, the proposal sets out indicative limit values to be applied during a second stage, to
reduce vehicle emissions in the year 2005. The purpose of introducing a second stage is twofold:

- it provides uniform targets to those Member States who would like to stimulate the
improvement of environmental technologies by granting fiscal incentives

- it gives advance notice to the automobile industry of the measures likely to be applied from
that date. In the meantime, taking into account that the limit values correspond to technologies
that are currently being developed, such as the NOx catalytic converter, it has been decided that
the indicative limit values proposed will be subject to confirmation by no later than 31

C0M96EN3 DOC, 9 July, 1996

19

December 1998 on the basis of the Auto-Oil II programme. The Commission expects that the oil
and automobile industries will continue to co-operate constructively with a view to identifying
the most cost-effective measures in order to reduce environmental pollution.

In December 1996 the Commission adopted a strategy paper setting out how to reduce C02
emissions from automobiles which are a major contributor to anthropogenic emissions of C02
and which contribute to global warming. At the Environment Council of June 1996, the
Commission's approach was broadly endorsed. The centre-piece of this strategy consists of a
voluntary monitored agreement to be negotiated with industry (European and importers) aimed
at reducing the average fuel consumption of new cars to a level equivalent to 5 1/100 km for
petrol cars and 4.51/100km for diesel cars by 2005 (if possible) or 2010 at the latest.
Negotiations with industry will begin shortly. The Council will be informed of progress achieved
by December 1996.

Work is also advanced on a Commission proposal on the treatment of end-of-life vehicles, an
environmental problem of growing concern. While manufacturers are paying particular
attention today to design cars which can be more easily dismantled and recycled, there are still
concerns that the amount of recyclable material is not high enough nor is the overall.recovery
rate satisfactory. It remains to be seen if these issues should be dealt with through legislation
(for example by setting mandatory quotas of recyclable material) or whether a voluntary
approach, building on industry experience so far should be followed instead. [42] Whichever
solution is finally adopted, it is essential that all actors - manufacturers, suppliers, dismantlers,
treatment plants play their role and that the burden is not unreasonably placed on one segment of
the industry.

Finally, in the environmental area, the Commission's White Paper on Energy Policy [43] 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
43 COM (95)682

C0M96EN3.DOC, 9 July, 1996

20

creation of the information society. It has been estimated that the use of transport telematics
alone, as has been suggested as part of the TransEuropean Networks project, can increase the
capacity of the existing infrastructure by up to 20%. Improved interoperatability between
different transport modes would also greatly benefit motor vehicle users. Furthermore, the
building of new roads in peripheral regions and in areas bordering the Central and Eastern
European economies would notably benefit the integration of these regions into the Single
Market economy.

3.4.2 Orientations for the future

**Improved co-ordination of** **regulatory** **policies**
Regulatory policy is based above all on the need to harmonise divergent national regulations and
ensure high levels of safety, environmental and consumer protection in accordance with Article
100A of the Treaty. Much of the regulatory activity in this area is linked to the putting in place
of the European type-approval system for motor vehicles. Hitherto it could be said that policy
was governed above all by the twin objectives of the need to ensure that the highest safety
standards prevail on the European market and that pollutant emissions are minimised in
consistency with the availability of technologies.

More recently it has become clear that regulatory pressure on the industry has become more
intense as public authorities have been obliged to react to public pressure demanding the further
regulation and control of the industry. Currently issues directly concerning the automobile
industry are subject to the following major policy initiatives :

Preparation of new emission standards for "stage 2000" for cars, light duty vehicles and
heavy duty diesel engines in accordance with the results of the "Auto-Oil" programme;
completion of the current co-decision procedure on light commercial vehicles.
Completion of the co-decision procedure regarding the introduction by 1998 of new
crashworthiness standards to protect car occupants against front and side impact crashes;
Preparation of a draft directive on the treatment of "End of Life" vehicles which will have
important consequences for the automobile industry;
Preparation of a new directive on "pedestrian friendly car fronts" designed to reduce the
dangers of car fronts for pedestrians;
Commission Communication on options to reduce CO2 emissions from cars.
Commission Green Paper on the internalisation of external costs from transport.
The co-decision procedure currently underway on the directive on "design protection"
and the specific provisions for crash repair parts which are design protectable.

Each of these initiatives responds to a particular political, economic, social or environmental
need and in themselves are perfectly justifiable. Collectively, however, they amount to a quite
formidable system of regulation or potential regulation on the industry which, taken as a whole,
profoundly affects the business environment in which the automobile industry functions in
Europe and, indirectly, in third markets. Given that the strengthening of industrial
competitiveness, high value added employment and investment in Europe remain goals of
industrial policy, much more attention must be given to the overall interaction of different policy
initiatives and their impact on the sector as a whole. To take a simple example, additional safety
requirements on the one hand, and high recyclability requirements on the other, would lead to
the addition of weight to a vehicle which, ceteris paribus, will increase fuel consumption. This
emphasises the need to give greater prominence to the impact on competitiveness of different
regulatory and other actions affecting industry as a whole, a matter which should be reviewed in
the Intergovernmental Conference renewing the Maastricht Treaty. In order to encourage further
discussion about how better co-ordination of policies can be achieved, the Commission has
drawn up an inventory of future regulatory measures, that will be updated on a regular basis.

COM96EN3 DOC, 9 July, 1996

**21**

**The high level advisory group**
The idea to create a high-level group advising the Commission on questions concerning the
automotive sector and the use of motor vehicles as a means of transport was first advocated by
the Economic and Social Committee and taken up by the European Parliament, which, in its
Resolution of 21 September 1995^ asked the Commission to create "a high level panel made
up of industry, social partners, motoring organisations/user groups, the Parliament and the
Commission to meet three times a year to review the impact of the range of EU policies as they
effect the automobile industry..." The Commission in principle accepts this suggestion and is
now consulting ACEA (car manufacturers), CLEPA (component makers), the social partners and
user groups to obtain their endorsement, which is essential for the project to succeed. The panel
will comprise a core group of some CEOs from the major car companies, and will be modelled
after the one already existing in the maritime industry.

It is also foreseen to establish another high level panel soon. This group, comprising senior
representatives from the Commission, the automobile and component industries, but also power
generating utilities and public authorities, will have the mandate to advise the Commission on
research priorities and strategies. There are strong practical arguments for merging the two
suggested high level groups into one organisational structure, comprising a **top lever** panel to
discuss political questions with Commissioners and MEPs, and a sub-panel on research which
would bring together the company board members responsible for R&D.

The issue of regulatory coherence in the automobile industry that was discussed above is
particularly relevant in the environmental sphere and should be a key matter to be taken up by a
high level advisory group.

44 PE 193/733

COM96EN3 DOC, 9 July, 1996

22

**4.** **Summary**

In its resolution on the automobile industry, the European Council _"recognises that the Union_
_has an important role to play in creating a favourable business environment for the automobile_
_industry which sets an appropriate framework for a future-oriented and coherent approach to_
_the development, production, distribution and use of the automobile and its impact on the_
_environment and on society as a_ _whole "._

Since this resolution was passed, important achievements have been made:

The Task Force "Car of tomorrow" has started to operate
The Block Exemption Regulation for the distribution of motor vehicles

has been renewed

Industrial co-operation has been established with China / India
The Korean and Japanese markets have been opened further to European
imports
Contacts between European suppliers and Japanese manufacturers have
been enhanced at the JÀMA-CLEPA business conference with the

support of the European Commission
The necessary regulatory work for the EC Type-Approval, becoming
mandatory for new types of passenger cars in 1996, has been completed
The results of the Auto-Oil programme, which is based on air quality targets
for major European cities and a detailed cost-benefit assessment, have been
released and have been used as the basis for new Commission proposals to
reduce passenger car emissions
New safety and environmental initiatives have been taken (front and side impact

crash protection, safety belts in buses and coaches) and more are underway
A training network has been initiated with funding from the FORCE programme,
resulting in 53 concrete, innovative training project proposals. The continuation
of networking under the LEONARDO programme has been confirmed

However, as explained in this Communication, further joint industry - governmental efforts need
to be undertaken to facilitate a further improvement in the industry's competitiveness. The
Commission will continue to work in order to improve the framework conditions for the
European automotive industry, utilising cost-benefit assessment techniques to take
environmental and social constraints into account in new regulatory policy. Europe's automobile
industry is one of the bedrocks on which the European economy is built. It is an asset to be
carefully developed. Both, public authorities on the one hand, and employers and workers on the
other, have key roles to play to ensure that this can be achieved.

COM96EN3.DOC, 9 July, 1996

_**Zj**_
**Graphs and Tables**

Graph 1 : Total light vehicle production by major group in 1995

Graph 2: Average net present values for car manufacturing investments

Table 1 : Market shares: New car and LCV registrations in the EU, USA, Japan and Korea

Table 2: World car and LCV production

Table 3 EU 12 trade with extra-EU

Table 4 Unit labour cost EU/USA/Japan

Table 5 Employment NACE 3500 by member state

Table 6 New car registrations 1-3 1996

COM96EN3 DOC, 9 July. 1996

Graph 1:

Total Light Vehicle Production by Major Group in 1995:

DRI Mc Graw-Hill / LMC

Graph 2:

Average Net Present Values for car manufacturing investments

```
  2500

  2000

  1500

  1000

   500

```

**!** **i**
```
    0

   -500

```

EU Highest USA Japan

-104MECU

EU LowsBT

_**Ik**_

Table 1 Registrations in thousand

**Market shares :**

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

REGISTR.

1994

1845.3

1535.7

1600.9

1349.1

1513.5

1442.5

793.1

560.5

214.4

10855.1

1430.1

904.9

463.1

34.6

27.5

61.9

114.9

318.8

**12780.8**

5015.9

3818.1

2204.0

11038.0

3508.0

405.1

138.3

**15089.4**

2031.0

1046.0

755.2

501.3

1891.8

6225.3

102.5

36.7

173.1

171.1

25.7

6526.7

722.9

412.3

249.6

171.5

1556.3

1.8

2.0

0.0

1560.1

REGISTR.

1995

1977.5

1544.8

1509.7

1394.8

1535.3

1358.7

773.3

547.7

228.3

10870.2

1400.0

836.0

498.6

28.9

36.6

66.6

182.8

336.7

**12856.3**

4841.6

3801.0

2164.3

10806.9

3364.5

462.8

132.1

**14766.3**

2029.0

1131.6

820.0

567.0

1929.3

6476.9

143.2

40.6

223.3

221.7

21.6

6865.0

746.1

441.5

198.9

169.8

1556.3

2.6

4.3

0.0

**1563.3**

_CHANGE_

_95/94_

(*)

_7.2%_

_0.6%_

_-5.7%_

_3.4%_

_1.4%_

_-5.8%_

_-2.5%_

_-2.3%_

_6.5%_

_0.1%_

_-2.1%_

_-7.6%_

_7.7%_

_•16.5%_

_33.0%_

_7.5%_

_59.1%_

_5.6%_

_0.6%_

_-3.5%_

_-0.4%_

_-1.8%_

_-2.1_ _%_

_-4.1_ _%_

_14.2%_

_-4.4%_

_-2.1%_

_-0.1%_

_8.2%_

_8.6%_

_13.1%_

_2.0%_

_4.0%_

_39._ _7%_

_10.7%_

_29.0%_

_29.6%_

_-16.0%_

_5.2%_

_3.2%_

_7.1%_

_-20.3%_

_-1.0%_

_0.0%_

_39.8%_

_121.4%_

_0.2%_

MARKET

SHARE

1993

14.9%

12.1%

12.2%

10.2%

11.7%

10.9%

6.2%

4 . 1 %

1.5%

83.6%

12.5%

9.0%

3.2%

0.2%

0.2%

0.5%

0.8%

2.6%

100.0%

25.6%

33.5%

14.7%

73.8%

23.1%

2.3%

0.8%

100.0%

31.8%

17.0%

11.1%

6.3%

30.7%

96.9%

0.8%

0.3%

2.2%

2.2%

0.0%

100.0%

45.8%

32.9%

18.4%

2.8%

99.9%

0.1%

0.0%

0.0%

100.0%

MARKET

SHARE

1994

14.4%

12.0%

12.5%

10.6%

11.8%

11.3%

6.2%

4.4%

1.7%

84.9%

11.2%

7.1%

3.6%

0.3%

0.2%

0.5%

0.9%

2.5%

100.0%

33.2%

25.3%

14.6%

73.2%

23.2%

2.7%

0.9%

100.0%

31.1%

16.0%

11.6%

7.7%

29.0%

95.4%

1.6%

0.6%

2.7%

2.6%

0.4%

100.0%

46.3%

26.4%

16.0%

1 1.0%

99.8%

0.1%

0 . 1 %

0.0%

100.0%

MARKET

SHARE

1995

15.4%

12.0%

11.7%

10.8%

11.9%

10.6%

6.0%

4.3%

1.8%

84.6%

10.9%

6.5%

3.9%

0.2%

0.3%

0.5%

1.4%

2.6%

100.0%

32.8%

25.7%

14.7%

73.2%

22.8%

3.1%

0.9%

100.0%

29.6%

16.5%

11.9%

8.3%

28.1%

94.3%

2.1%

0.6%

3.3%

3.2%

0.3%

100.0%

47.7%

28.2%

12.7%

10.9%

99.6%

0.2%

0.3%

0.0%

100.0%

SHEET536.XLS / 1

##### **_is_**

_CHANGE_

_94/93_

{*)

_2.9%_

_5.7%_

_9.1%_

_10.0%_

_7.6%_

_9.9%_

_6.5%_

_14.7%_

_18.9%_

_7.8%_

_-5.3%_

_-16.6%_

_22.0%_

_59.6%_

_11.0%_

_6.4%_

_24.4%_

_3.4%_

_6.1%_

_40.8%_

_-18.2%_

_7.6%_

_7.4%_

_9.2%_

_27.4%_

_26.3%_

_8.4%_

_-1.3%_

_•4.7%_

_5.2%_

_23.7%_

_-4.8%_

_-0.6%_

_88.2%_

_90.2%_

_19.4%_

_18.8%_

_1333.3%_

_0.9%_

_4.9%_

_-16.7%_

_-10.1%_

_312.6%_

_3.5%_

_27.6%_

_292.4%_

_3.6%_

_vw_ _GROUP_ _r_ V

_GMEC)_
_PSA (*•)_
_FIAT_ _1**)_
_FORD_ _EUROPE_ _(**)_
_RENAULT_ _C")_
_BMW + Rover_ _(•*)_
_MERCEDES_ _1*")_

_VOLVO (**)_
_TOT. EU_ _(Prod,_ _in EU_ _15)_

_JAPANESE_

_IMPORTS FROM JAP._

_PROD. IN EU_ _15_

_PROD. IN US_

_PROD. IN OTHER ZONES_

_US_

_KOREAN_

_OTHERS_

_TOTAL_

USA

_GM_

_FORD_

_CHRYSLER_

_BIG3_

_JAPANESE_

_TOTAL EU 15_ _(••*)_

_KOREAN_

_TOTAL_

JAPAN

_TOYOTA_

_NISSAN_

_MITSUBISHI_

_HONDA_

_OTHER_ _JAPANESE_

_TOTAL JAPAN_

_US_ _Unci._ _Jap. trans.)_

_US-BIG 3_

_TOT._ _EU_ _15_ _find._ _Jap. trans.)_

_EU MAKES_ _(••*)_

_OTHERS_

_TOTAL_

SOUTH KOP$A

_HYUNDAI_

_KIA_

_DAEWOO_

_OTHER_ _KOREAN_

_TOTAL KOREAN_

_US_

_TOTAL EU_ _15_

_JAPAN_

_TOTAL_

REGISTR.

1993

1793.9

1453.0

1466.8

1226.8

1406.3

1312.8

744.6

488.6

180.3

10073.2

1510.8

1084.8

379.5

21.7

24.8

58.2

92.3

308.4

**12042.8**

3562.4

4667.0

2047.8

10277.2

3213.0

318.0

109.5

**13917.2**

2058.0

1098.0

717.7

405.1

1987.2

6266.0

54.5

19.3

145.0

144.0

1.8

**6467.3**

689.3

495.1

277.7

41.6

1503.7

1.4

0.5

0.0

1505.7

Source : DRI Mc Graw Hill / LMC & Polk / A A A / Automotive News / J A M A / JAIA / K A M A

(*) 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)

_Table 2_

**WORLD CAR AND LCV PRODUCTION**

**TOP TEN** **CAR & LCV PRODUCING COUNTRIES** **IN** **1995.**

(in 1,000) _EXCLUDING DOUBLE COUNTING_

LCV

5301

2234

171

270

535

1041

350

205

213

246

LIGHT VEHICLES

**11639**

**9845**

**4531**

**2635**

**2566**

**2368**

**2309**

**1737**

**1635**

**1462**

USA

JAPAN

GERMANY

FRANCE

SOUTH KOREA

CANADA

SPAIN

UK

ITALY

BRAZIL

**WORLD SUMMARY**

(in 1,000)

EU15

EASTERN EUROPE

USA

OTHER NAFTA

_NAFTA - SUB TOTAL_

JAPAN

SOUTH KOREA

OTHER ASIA

_ASIA - SUB TOTAL_

LATIN AMERICA

OTHER

TOTAL

PASSENGER CARS

6338

7611

4360

2365

2031

1327

1959

1532

1422

1216

**PRODUCTION OF CARS & LCV IN 1995.**

_EXCLUDING DOUBLE COUNTING_

PASSENGER CARS

12617

2025

6338

2025

_8363_

7611

2031

902

_10544_

1449

561

35559

LCV

1293

212

5301

1254

_6555_

2234

535

917

_3686_

291

115

12152

LIGHT VEHICLES

**13910**

**2237**

**11639**

**3279**

**14918**

**9845**

**2566**

**1819**

**14230**

**1740**

**676**

**47711**

_Source : DRI_ _Mc_ _Graw_ _Hill_ _/ Marketing Systems_

_WORLD CAR & LCV PRODUCTION_ _IN_ _1995(*)_

LATIN AMERICA

4%

SOUTH KOREA

5%

/ 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**_

IMPORTS FROM EXTRA-EU

_UNITS_

EXPORTS TO EXTRA-EU

1,747,389

1,944,494

1,903,710

1,629,765

1,420,765

NET TRADE

68,660

-389,453

-327,973

1990

1991

1992

1993

1994

1,816,049

1,555,041

1,575,737

1,760,635

2,218,438

1993 1,629,765 130,870
1994 2,218,438 1,420,765 797,673

_Source : Eurostat /_ _Comext_

_**NEW**_ _**PASSENGER**_ _**CARS & LCVSs**_

NET TRADE

10,755,114

5,221,763

4,728,293

21,775,167

17,278,793

NET TRADE

4,182,995

3,886,536

2,804,291

3,722,857

2,759,035

_000 ECU_

1990

1991

1992

1993

1994

_Source : Eurostat / Comext_

EXPORTS TO EXTRA-EU

22,069,335

18,953,146

19,379,697

23,014,965

29,656,735

_**PARTS**_ _&_ _**ACCESSORIES FOR MOTOR**_ _**VEHICLES**_ _(**)_

IMPORTS FROM EXTRA-EU

11,314,221

13,731,383

14,651,404

1,239,798

12,377,942

IMPORTS FROM EXTRA-EU

9,981,038

10,825,793

12,004,406

12,467,708

15,414,109

_000_ _ECU_

1990

1991

1992

1993

1994

EXPORTS TO EXTRA-EU

14,164,033

14,712,329

14,808,697

16,190,565

18,173,144

_Source : Eurostat_ _/_ _Comext_

_t*_ _') Includes parts & accessories for motor vehicles_ _ICN_ _code 8708);_

_as well as other relevant parts & components for motor vehicles included in chapters 40; 68; 70; 83; 84; 85; 87; 94 of the Combined_ _nomenclature._

_**\NEW PASSENGER**_ _**CARS & LCVSs**_ _**+ PARTS & ACCESSORIES**_ _**FOR MOTOR**_ _**VEHICLES**_

_**000**_ _**ECU**_ `EXPORTS TO EXTRA-EU` `IMPORTS FROM EXTRA-EU` `NET TRADE`

```
      1990 36,233,368 21,295,259 14,938,109

      1991 33,665,475 24,557,176 9,108,299

      1992 34,188,394 26,655,810 7,532,584

      1993 39,205,530 13,707,506 25,498,024

      1994 47,829,879 27,792,051 20,037,828

       000 ECU

```

```
50,000,000

45,000,000

40,000,000

35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

 5,000,000

     0

```

E ^

^ 1

- 1
## 1

### jEEg ki^P

[1 ]

5sJ—i tsss^

**Hi**

EEÎM

_t._ H ^ 5

=jj|:|

r~~r i i i

T ^ T [1 ]

ill

```
H EXPORTS TO EXTRA-EU

0 IMPORTS FROM EXTRA-EU

• NET TRADE

```

1 _4_

```
         1990 1991 1992 1993 1994

```

_Source : Eurostat_ _/_ _Comext_

_CI_ _Note : Austria, Sweden & Finland were not members of the EU in_ _1990-1994_ _and are therefore included as trading partners._

27/06/96 SHEET469.XLS

_**7^**_

_Table 4_
**Unit labour cost * in the automobile industry : An international comparison.**

1995 (p)

5 4 %

7 4 %

5 9 %

4 6 %

5 9 %

6 0 %

6 8 %

5 0 %

4 4 %

D 1 9 8 0

S 1 9 9 3

1 0 1 9 9 5 (p)

1993

59%

78%

6 9 %

55%

66%

60%

63%

4 4 %

4 7 %

France

Germany

Italy
Spain
United Kingdom
Belgium

Netherlands

Japan

USA

1980

7 2 %

77%

67%

64%

92%

74%

7 2 %

4 4 %

63%

_SOURCE : VDA,_ _NACE,_ _JAMA, MMVA, DRI, National Associations._

_Ip)_ _preliminary data_

- _Labour cost per unit of gross value_ _added._

**1 0 0 %**

90% J

80% -;

7 0 %

6 0 %

5 0 %

4 0 %

3 0 %

2 0 %

1 0 %

0 %

**France** **Italy** **United Kingdom** **Netherlands** **USA**

SHEET517.XLS

_Table_ _5_

Employment NACE 3500 (Motor Vehicles and Parts)

```
Belgium

 55,075

 49,959

 49,461

 48,636

 48,271

 50,359

 51,770

 51,390

 52,865

 54,283

 55,774

 55,160

 54,829

 52,292

 49,534

```

```
Spain

159,851

145,057

144,269

145,281

142,561

138,520

136,872

142,603

141,628

146,670

147,106

146,864

144,500

135,722

134,050

```

```
Sweden *

 116,900

 113,800

 113,800

 106,100

 107,800

 113,500

 113,900

 114,400

 112,500

 115,300

 107,600

 102,900

 96,400

 94,204

```

 - a - F

 - • - U K

I

E

B

SWE

```
 Italy

294,910

272,055

261,936

241,332

226,727

210,244

200,649

200,028

203,718

208,359

211,850

206,735

193,383

177,232

165,617

```

```
 UK

437,159

356,989

313,216

290,035

280,114

268,808

253,192

250,895

258,481

259,770

260,977

239,084

226,758

204,450

195,870

```

```
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

```

```
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

```

900,000

800,000

700,000

600,000

500,000

400,000

300,000

Source: Eurostat

**Employment** **by** **Member State (NACE 3500)**

1980 1982 1984 1986 1988 1990 1992 1994

= Source UNIDO (Manufacture of Transport Vehicles and Parts)

**C)** _**(%**_

Table 6 Sales figures in thousand

**Market shares**
**New** **car & LCV** **registrations** **in the** **EU, USA, Japan and South Korea**

_REGIST._

_1-III_

_95_

_CHANGE_

_%_

_**n**_

**10.1%**

**2.8%**

**4.3%**

**11.3%**

**5.1%**

**0.0%**

**0.8%**

**12.4%**

-27.5%

**5.1%**

**4.6%**

**-14%**

_13.1%_

_-22.8%_

_65.8%_

5.5%

75.0%

_9.3%_

**5.8%**

**1.6%**

**1.0%**

12.7%

**3.7%**

**5.3%**

**9.6%**

**-11.2%**

**4.1%**

**-1.6%**

-21 **.9%**

**-4.3%**

**11.1%**

17.2%

**0.8%**

**41.3%**

36.2%

**13.8%**

**19.4%**

-26.1%

**1.6%**

**-2.9%**

**5.5%**

-22.5%

76.7%

**4.7%**

**4.8%**

_Point_

_change_

0.59%

-0.34%

-0.17%

0.61%

-0.08%

-0.60%

-0.28%

0.26%

-0.59%

-0.59%

-0.12%

_•-0.46%_

_0.25%_

_-0.07%_

_0.15%_

0.00%

0.63%

_0.09%_

-0.76%

-0.79%

1.25%

-0.29%

0.26%

0.16%

-0.12%

-0.92%

-4.10%

-0.71%

0.72%

4.26%

-0.76%

0.61 %

0.20%

0.33%

0.43%

~-0.78%

-3.55%

0.17%

-3.50%

6.71%

-0.16%

_0.05%_

_0.12%_

_0.00%_

_MARKET_

_SHARE_

_1_ _- III 96_

15.2%

11.7%

11.9%

12.3%

12.1%

10.3%

5.5%

4.4%

1.3%

84.6%

10.7%

_6.2%_

_3.8%_

_0.2%_

_0.4%_

0.4%

1.6%

_2.7%_

100.0%

31.6%

25.9%

16.3%

73.8%

22.3%

3.2%

0.7%

100.0%

28.7%

13.6%

11.6%

8.4%

32.0%

94.2%

2.2%

0.8%

3.1%

2.9%

_0.5%_

100.0%

44.6%

28.5%

9.9%

16.5%

99.5%

_0.2%_

_0.4%_

_0.0%_

100.0%

_MARKET_

_SHARE_

_1 -_ _III 95_

14.6%

12.0%

12.0%

11.7%

12.1%

10.9%

5.8%

4.1%

1.9%

85.2%

10.8%

_6.7%_

_3.6%_

_0.3%_

_0.3%_

0.4%

1.0%

_2.6%_

100.0%

32.3%

26.7%

15.1%

74.1%

22.0%

3.0%

0.8%

100.0%

29.6%

17.7%

12.3%

7.6%

27.7%

95.0%

1.6%

0.6%

2.8%

2.5%

_0.7%_

100.0%

48.1%

28.3%

13.4%

9.8%

99.6%

0.7%

_0.2%_

_0.0%_

100.0%

_MÊmmÊmÊmmÊÊÊÊÊÊmÊmi_

VW GROUP (")
GME (")
PSA (")
FIAT (")
FORD EUROPE (")
RENAULT (")
BMW + Rover (")
MERCEDES (")
VOLVO (")
TOT. EU (Prod, in EU 15)

JAPANESE

_IMPORTS FROM JAP._

_PROD. IN_ _EU_ _15_

_PROD._ _IN_ _US_

_PROD._ _IN_ _OTHER ZONES_

US

KOREAN

_OTHERS_

TOTAL

USA

GM

FORD

CHRYSLER

BIG3

JAPANESE

TOTAL EU 15

KOREAN

TOTAL
#### lillllllll^^

TOYOTA

NISSAN

MITSUBISHI

HONDA

OTHER JAPANESE

TOTAL JAPAN

US (Incl. Jap. trans.)

US-BIG 3

TOT. EU15 (Incl. Jap. trans.)

EU MAKES

_OTHERS_

TOTAL

SOUTH KOREA

HYUNDAI

KIA

DAEWOO

OTHER KOREAN

TOTAL KOREAN

_US_ _r»)_
_TOTAL_ _EU_ _15_ _(**")_
_JAPAN_ _("**)_

TOTAL

**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**

_REGIST._

_1-III_

_96_

**566.5**

**434.3**

**441.5**

**459.2**

**449.0**

**382.6**

**206.5**

163.5

**47.8**

3150.9

397.2

2317

_143.3_

_6.8_

_15.3_

**15.9**

**59.7**

_99.4_

**3723.1**

1141.8

937.9

591.3

2671.0

805.1

115.0

25.8

**3617.0**

**ggggggggggSg:**

573.3 564.3

342.9 267.7

238.1 227.8

148.0 164.5

536.4 628.6

1838.7 1852.9

30.2 42.7

11.6 15.8

53.8 61.2

47.7 56.9

_13.1_ _9.6_

**1935.8** **1966.4**

177.9 172.8

104.7 110.4

49.6 38.4

36.2 63.9

368.4 385.6

_0.5_ _0.7_

_0.9_ _1.4_

_0.0_ _0.0_

**369.8** **387.7**

**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

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