With the arrival of the euro it is time for automakers to harmonize pre-tax prices and put an end to the wide differences that exist throughout Europe.
The atmosphere is getting tough. Consumers and government regulators are no longer willing to accept prices that can vary by up to 60 percent from country to country. In the UK, Europe's most expensive market, some legislators said earlier this month that manufacturer and dealer chiefs should be jailed for overcharging car buyers.
The ease of price comparisons that will result from a common currency will bring even more pressure to lower prices.
Carmakers have partly justified price differences by citing different exchange rates and specification packages across Europe. Indeed, customers generally demand higher base-model specifications in Germany than in Spain. But other factors contribute to the differences. In the UK, for example, high specification levels are created for the fleet market, which accounts for up to 70 percent of sales. A basic specification for private buyers in the UK is the equivalent of a luxury specification in some other countries.
The euro will eliminate exchange rates as an excuse for high prices. And price comparison will be easier without currency differences. Buyers will increasingly cross borders to buy cheaper cars, and there will be nothing the industry can do to stop them.
But price uniformity can benefit automakers as well as consumers. And it doesn't necessarily mean a collapse in prices. It means a consistent strategy - not too high in countries like the UK and Germany, and not excessively low in countries with high car taxes. Indeed, an end to subsidized pricing in countries like Denmark should force harmonization of car taxes in Europe.
European automakers must change or suffer the consequences. The Japanese are among the first volume makers to react. Nissan and Toyota have both said they will make their specification packages in Europe more uniform. Others must follow.