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British Car Buyers Taken for a Ride, Consumer Groups Say

July 23, 1999|MARJORIE MILLER | TIMES STAFF WRITER

LONDON — When it comes to cars, it appears that neither the free market nor the European single market has been working for British consumers.

This is the most expensive new-car market in the European Union for 60 of the 74 best-selling models, with Britons paying up to 40% more.

No matter that Britain is the third-largest car market in Europe, has some of the lowest automobile taxes in the region and even produces some of the cars at home.

A British-built Rover 414, which sells for about $18,200 in Britain, can be found in Portugal for about $12,720--a saving of 30%.

Likewise, a Rover 200 that sells for about $28,640 in Britain goes for less than $17,000 in the Netherlands--a 40% saving.

The reason for these inflated prices is the subject of an inquiry by the government Competition Commission, which held a rare public hearing on the issue this week and is due to publish a report at the end of the year.

All of the big automobile manufacturers boycotted the hearing, apparently preferring closed-door testimony to what might have been a public pillorying.

Their spokesman, Roger King of the Society of Motor Manufacturers and Traders, insisted that new-car buyers are offered good deals on trade-ins, financing, insurance and other extras that amount to discounts.

"We believe the industry is competitive, responding to consumer needs in Britain," King said.

Consumer groups beg to differ. The Consumers' Assn. says manufacturers are taking British car buyers for a ride to the tune of about $9 billion a year by maintaining a stranglehold over distribution and engaging in price-fixing.

Furthermore, they charge, British consumers are being forced to subsidize car buyers in high-tax countries such as Denmark and Finland. Pretax car prices are almost twice as high in Britain as in Denmark and Finland, for example, although the end price to consumers there may be the same as or lower than in Britain.

Car taxes in Britain are 17.5% of the sales price, compared with 180% in Denmark.

After an investigation by Britain's Office of Fair Trading, Volvo, the Swedish car maker that has been acquired by Ford, admitted last month that some of its "rogue" employees had tried to fix prices by threatening to penalize dealers who offered discounts.

The problem appears to be widespread, however, and is not confined to Britain. The European Commission fined Volkswagen about $110 million in January because its Italian dealers were prevented from selling Golfs and Passats to customers from Germany, where the sticker prices for those models are higher.

European law guarantees car buyers the right to shop in any market, although consumer groups say manufacturers routinely try to block cross-border purchases.

Nonetheless, British buyers are slowly catching on to the fact that they can save money by importing their cars, even though they demand right-hand drive and speedometers in miles rather than kilometers.

Thanks to the Internet--which gives them access to a broader range of prices and information--and to a handful of entrepreneurs, each week hundreds of Britons are buying elsewhere.

Steve Shaw of Reading is one of them. He began comparison shopping on the Internet in May and discovered the Essex-based company Broadspeed Ltd., an intermediary offering lists of car prices around Europe and help in importing new cars.

Last week, Broadspeed delivered Shaw's metallic silver Hyundai Coupe FX purchased in Ireland for about $7,500 less than it would have cost him in Britain.

"I am absolutely delighted," Shaw said in a telephone interview. "As more and more people find out how artificially high the prices are here, they will do it too."

Simon Empson, managing director of Broadspeed, is banking on that. He has joined forces with Stena Line, a ferry operator, to offer "car cruises" to the Netherlands. Packages include round-trip transportation, plus help in importing the cars.

Individual imports still account for less than 5% of new-car purchases in Britain. But Empson sees room for growth--and hopes to begin direct sales of new cars over the Internet soon.

"The issue is fairness," Empson said. "Why should British consumers pay twice as much as Dutch or Danish consumers for the same car?"

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