The benefits for car industries to set up specifically in EU countries which are based in central and eastern Europe is that the cheaper factors of production leads to fall in prices and greater demand for cars, this increase in demand which then leads to increased output and better resource exploitation and therefore increases economies of scale and global competition and hence increased profits for the car industry.
An example of where car manufacturers have exploited these harmonised rules made by the EU are Skoda who are producing cars in Czech Republic and Fiat who produce their cars in Italy and Poland.
Another way in which the EU economic integration has affected the car industry is through pricing laws specifically affecting the UK. Various surveys done by the EU have shown that prices of cars in the UK are far higher than in other EU countries.
Eg: A Subaru Legacy costing £14,342 in the UK before tax could be purchased in Denmark for £7,115.
European commission therefore endorsed a radical shake-up of the way in which new cars are sold in the single market.
Brussels has given dealers the freedom to open for business anywhere in the EU.
Until now their commercial activities have been confined to a specific geographical area, but in future a dealer from France, the Netherlands or Denmark - or anywhere else where prices are lower could set up shop in the UK. The consumer association stated "We're hopeful we'll see a price reduction of about 20%, or anything between £500 and £3,000, depending on the car,"
Under the new rules - which will be phased in over three years and do not require the government's approval - dealers will also be able to open up supermarket-style showrooms offering a selection of brands, rather than just one, as is the case at present.
Under the new regime, dealers will:
have to chose between two distribution methods:
- Selective, where they may sell actively to consumers in any location and in any EU country.
- Exclusive, where they are still allocated exclusive distribution areas, though they will also be free to sell to independent resellers and to customers from outside the area who contact them directly
They will also be allowed to exhibit cars of different brands in the same showroom but in separate sales areas.
HOWEVER THE CAR INDUSTRIES IN MANY EUROPEAN COUNTRIES HAVE BEEN AGAINST THIS BECAUSE: The car industry is worried that supermarkets will push small car dealers out of the market, dilute car brand integrity.
