British Motor Industry And The Common Market

Press, Volume CI, Issue 29713, 5 January 1962, Page 13

British Motor Industry And The Common Market

(From our London Correspondenil

DRITISH membership of the Market is genererally favoured by the motor industry in the United Kingdom. subject to those essent al safeguards which would permit it to compete with Continental manufacturers on reasonably level terms. Certainly some sound arguments have been presented by persons distinguished in the industry to support Britain's joining of the European Economic Community. Well Equipped

It has. for instance, been argued that British motor manufacturers are well equipped by temperament for the exciting excursion into the European Mrrket. a contributing factor here being that survival in the industry has demanded, first, extremely high standards in design and production efficiency, and, second, a commercial "flair.” To what extent would Britain's effective home market be enlarged by linking up with the European Economic Community? One authority has put it from one of about 49m to something near 290 m: the attractions of such an expansion need no emphasis. Danger But what is calculated to encourage support from . the industry for entry into the Common Marl et is the danger attendant upon non-entry —the danger of becoming progressively isolated from rapidly-expanding markets by a tariff barrier against British products which would eventually encircle the Six (West Germany, Belgium, Luxembourg. France. Italy, and the Netherlands) a. a common rate ot 29 per cent. From Britain’s point of view the greatest field for expansion lies in the countries of the Common Market, countries in which, in three years, trade has increased by upwards of 70 per cent., and industrial production has risen by 25 per cent. If Britain and other European Free Trade Areas join the Common Market, this trend, it is felt, will continue. The volume of new cars sold in the countries of the Six and Seven (E.F.T.A.) during 1960 increased by 20 per cent, from a combined total of 3 4m, and to suggest that by 1965 the annual car sales in these countries will increase by another million is not regarded as an extravagant statement

Anyway, such is parochialism that, even when the trade barriers are down, it is felt that British manufacturers will retain the larger share of the British market as, for instance, German manufacturers will retain most of their own home-market sales Relative However, everything is relative. In these 30 countries there is, on an average, one vehicle to every 10 persons; the vehicle population is low by comparison with more than one in three in the United States. Britain's motor industry will obviously insist upon a clear statement of conditions of entry, and. in this respect, the timing of the reciprocal tariff reductions it will be called on to make is vitally important. A sales battle lies ahead; in this price will be a matter of the greatest significance. Obviously, then, allowance will need to be made for the difference in manufacturing costs between the countries concerned—that is. if the battle is to be fought on even terms. Such a situation could be fraught with difficulties. In Britain basic wages are

higher than in any country of the Six, but Continental manufacturers, in many instances, pay in the form of social charges which are correspondingly more. Moreover, because Britain is an island her manufacturers will also have to absorb higher freight charges. Countries of the European Economic Community have, through their four years of working together, become attuned to the existing trading conditions. Britain might be tempted to make too rapid a metamorphosis in order to fall into line, but already the country has been told to guard against any precipitate readjustment. Manufacturers feel that particular care must be exercised in determining a realistic time-table for a reduction of import duties. Commonwealth The Commonwealth is not being forgotten, for these markets, which are absorbing very nearly 50 per cent of the industry’s exports, also offer substantial long-term prospects for expansion. As one industrialist has stated: “Any agreement which seriously hampers the purchasing power of our Commonwealth partners will put us in danger of losing on the roundabouts what we hope to gain on the European swings." Domestic purchase tax is regarded by the industry as a crucial question. For success in the export field there must first be a buoyant and increasing market at home. It

is felt such a principle will apply with equal force within an enlarged European Economic Community; sound volume of business in the United Kingdom will be an essential prelude to successful sales of motor-cars to other countries in Europe. Sales Tax Sales tax varies enormously. For example, tax in Britain accounts for 32 per cent, of the retail price of a vehiicle. In France the figure is 19 per cent., and in Germany it varies between 10 per cent; and 17 per cent. Italy, too, has tax appreciably lower than Britain’s, all of which means that in France, Italy, and Germany the motor markets are all expanding more rapidly than that of the United Kingdom. Optimism These, then, are the principal problems facing Britain in her approach to the Common Market. But optimism reigns supreme in certain fields. British manufacturers are satisfied that they can match and, indeed, excel Continental competitors in range, styling, and technical design of their products, in their methods of production, and in their administration. One thing is perfectly clear: the industry has not been sitting complacently watching future events unfold, even though there may have been, in the light of uncertainty surrounding the Common Market entry, a temptation to do so.

Substantial expansion schemes have been embarked upon “just -in case”; money has been spent in developing the industry’s sales and service organisations throughout Europe. Expansion Take the mighty Rootes Group as an example. It now has its own sales and service companies with well-stocked parts depots in France, Germany, Italy, Belgium, Switzerland, Austria, and Sweden, together with large and active importers in the other major European markets. The group, which has opened in Paris the largest service depot ever established there by a foreign car manufacturer, has also built up a dealer organisation embracing every major centre in the Common Market countries and E.F.T.A. Competitive That the British industry, in the face of increasing import duties on its products, has strengthened its sales in the Six is regarded as significant, a pointer to the future. And just as encouraging has been the evidence of its competitive power in what has been described as the world’s most sophisticated motor market—the United States. f

Relentless competition lies ahead. lit will present a bhallenge that the British motor industry will be willing to meet.