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New models drive faster growth in European car prices

New car prices in Europe rose more quickly in the third quarter of 2005.

Average prices at the end of Q3 were 4.4% higher than a year ago, according to the latest quarterly pricing survey by PricewaterhouseCoopers and europrice.com.

European new car sales remained flat overall, growing 0.2% compared to the previous 12 months.

With the exception of the lower medium sector, sales fell in all segments. The largest drop in volume (-10.3%) was in the mini segment, which also saw some of the largest price rises, averaging 6.3%.

Chris Hibbs, UK automotive leader, PricewaterhouseCoopers said: "New model launches and facelifts over the past 12 months are driving strong increases in volumes and in turn prices are rising.

PwC said within the mini segment the average price is around €3,000 lower than in the small segment and margins are generally lower, so setting the right prices at the outset is essential. It said the production lifetime for a mini segment model can be over 10 years, so it is even more essential to establish sustainable margins on new models.

According to the PwC European New Car Price Index – a volume-weighted measure of relative new car prices - the most expensive car market in Europe is Denmark where new car prices are 92% higher than the eurozone average. The least expensive in Q3 was Switzerland, at 10% below average.

The average price of a new car in the UK rose by 3.5% between September 2004 and September 2005. This represents significant acceleration compared to the previous quarter, when the annual trend was for prices to fall slightly. UK prices remain close to the European average.

With overall sales down in the UK, some segments that are still growing are beginning to slow down. This is happening to sales of SUVs and particularly MPVs. Diesel sales are also slowing, although diesel cars' share of the market has now reached 34%.

The slow down in the growth in MPV, SUV and diesel models is also reflected in below average price increases for these models.

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