Price Cuts Across Europe
Prices are dropping across Europe and car companies are trying to lure buyers with discounts and free extras like air conditioning and automatic transmissions.
Warranties are being extended. Financing deals are being made more attractive. Offers that cannot be refused are being made for second-hand trade-in cars.
Manufacturers are producing more cars than there are customers to buy them.
There's 16 million units of capacity and a 12-1/2 million market. So obviously some companies have been really aggressive (in their pricing) to try to keep some semblance of high utilisation in their plants, General Motors Europe chairman Richard Donnelly said.
On Tuesday, Italian mass car manufacturer Fiat cut the price of its Punto small family car in France by 13.5 per cent. This was in response to across the board price cuts by France's Renault last weekend, which also prompted action by Ford.
Expect more of the same across Europe, analysts say.
Intensifying competition between manufacturers, additional capacity generated when they already had more than they could handle is going to create lots of price competition.
Car prices across Europe are probably as cheap is they've ever been and they can only get more competitive, said Ian Robertson of the Economist Intelligence Unit in London.
Peter Schmidt, analyst with Britain's Automotive Industry Data, agrees, saying: Manufacturers were stacked up to the eyeballs at the beginning of this year with cars nobody wanted to buy.
To move them from airfields and empty factory spaces on to customers' drives they've had to give incentives and price cuts right, left and centre. This is not a one off.
This is going to stay with us, it's going to intensify, Schmidt said.
Some industry experts say action should have come a lot earlier for Europeans, who have traditionally had to pay much more for virtually the same cars as their US counterparts.
Prices are too high here. Net prices are 20 to 30 per cent higher in Europe than the US, mainly because of low productivity and high labour costs, said Vic Heylen, managing director of the European Centre for Automotive Studies in Antwerp.
But Heylen wonders if even lower prices can attract European customers, often worried about job security.
A concerted effort by European governments to prepare for a single European currency by 1999 has led to deflation in many countries, which has constricted sales in sectors like automobiles and personal computers.
What's missing is market confidence. People here in Belgium, France and Germany are being told to tighten their belts. That's all you hear from morning to night. No wonder people are worried, Heylen said.
Visitors to the Paris Mondial de l'Automobile, which runs until October 13, will find an impressive array of new models.
New minicars and mini multipurpose vehicles (MPVs) take centre stage. There is the little Ford Ka, the first in a new wave of minicars destined for Europe.
Renault's Megane Scenic, a smaller version of the highly successful Espace MPV, is going on sale.
MPVs, know as minivans in the US market, can seat up to eight. They resemble vans with windows but offer a degree of luxury. Mini MPVs like the Scenic can seat up to five and are lighter, cheaper and offer families more versatility than a car.
Germany's Volkswagen is unveiling its new Passat large family saloon. In the same category Japan's Nissan presents its latest Primera. Ford has given its Mondeo a facelift.
Boy-racers with deep pockets will be looking enviously at Porsche's new high-performance machine, the Boxster. But no price cuts are likely on this formidable sports car.