Car price shake-up unveiled

Car manufacturers say prices have already fallen

Trade & Industry Secretary Stephen Byers has unveiled plans to increase competition in the motor industry.

Under the proposed changes, it will be easier for dealers to buy cars cheaply from authorised dealers in other European countries.

Suppliers will have to offer dealers similar volume discounts to those offered to fleet buyers.

Cost comparisons

ALFA ROMEO 145
UK - £11,040
Denmark - £6,178

CITROEN SAXO
UK - £6,442
Greece - £3,979

FIAT BRAVO
UK - £10,183
Finland - £6,304

Some estimate that these changes could result in price cuts on new cars of between 10% and 30%.

The proposals follow a Competition Commission report in April, which found that UK cars were up to 12% more expensive than in continental Europe.

"The measures I plan to introduce should bring about greater competition - and lower prices - by stopping suppliers discriminating against dealers," he said.

"It is important that consumers receive a fair deal. The competition commission's report made it clear that this is not happening and that we in Britain are paying over the odds for new cars," he added.

Mr Byers has given the car industry 30 days to respond to the new rules before changing the Fair Trading Act.

The Consumer' Association has welcomed the announcement as "music to the ears for the millions of consumers who have been taken for a ride by the motor industry".

On the defensive

Car manufacturers welcomed the announcement but immediately went on the defensive.

The Society of Motor Manufacturers and Traders pointed out that car prices have already dropped 10|% since the Competition Commission's report was published in April.

"There was a 5% increase in the number of private new cars registered last month compared with the number in May 1999 and a 10% increase in cars sold overall," a spokesman said.

He added that car makers simply did not have the margins to reduce prices by 30% or 40%.

The figures associated with fleet discounts had been exaggerated and become a "thing of legend", the SMMT had said earlier.

But many are optimistic prices will fall further.

"Before, the industry has said that prices cannot be reduced any further and they have still gone down. We think there will be further price cuts," Nick Stace, the Consumers' Association senior public affairs officer.

If prices do fall, consumers may lose out in other ways, Andy Pringle, deputy editor of What Car magazine said.

He added that fleet buyers may get cheaper cars but they sacrifice choice, something which consumers may not be prepared to do.

He added that many of the incentives manufacturers currently offer customers - such as free servicing - may disappear if they have to cut prices.

Inflated UK prices

A Competition Commission report in April found that UK motorists paid up to 12% more than their continental counterparts.

European Commission statistics show that UK buyers can pay up to twice as much as drivers in other EU countries.

Many potential car buyers have decided to wait and see what the government will do before parting with their cash.

The Consumers Association said buyers had been staying away from showrooms and described the move as a "victory for consumer power".