Common Market: Filling Europe’s Highways

In a marble-walled showroom not far from the Arc de Triomphe, a Volkswagen representative matter-of-factly calculated that his company now accounted for 40% of the light utility trucks sold in the Paris area. Across the Rhine, Germans were snapping up Fiats and Alfas at a clip that set an Italian auto executive to chortling, “So the Germans thought they were the only ones who could export cars!” In the bustling English Ford agency in Genoa, one of the scores of Genoese awaiting delivery of a new Anglia stabbed his ringer at the word “future”‘ in a poster proclaiming “There’s a Ford in your future,” and muttered sadly: “How true.”

All across Western Europe last week, the automakers of Britain and the Common Market nations were racing to keep up with their new international market. Since the signing of the Common Market treaty in 1957, auto exports between the six member nations have soared 153% to nearly 450,000 cars last year. Total production of Common Market automakers during the same period has jumped from 1,674,000 to 2,890,000 cars.

Part of the reason for the European auto boom has been the reduction of tariffs and elimination of quotas among the Common Market nations. So far, each of the Six has cut its auto tariffs against other members by at least 40%. Last week West German Economics Minister Ludwig Erhard pushed through the Bundestag another 50% slash in his country’s intra-Market car tariff. This was partly revenge for Erhard. He had tried a la Kennedy to stop German automakers from raising their prices; but they refused to withdraw their increases. So down went their tariff protection.

Helpful as the tariff cutting has been. Common Market economists agree that the chief reason for the auto boom is the buoyant psychological climate which the vision of a single market of 170 million customers has created in Western Europe. To prove their point, the Common Marketeers point to Britain, which as a nonmember still must hurdle the high tariffs that the Six impose on outsiders. Despite this, British automakers have doubled their sales to the Common Market in the past six months, now sell more cars there (9,000 a month) than in the U.S.

Beating the Sneer. Each of its three biggest members entered the Common Market with one big auto manufacturer that dominated its market: Volkswagen, with 40% of production in Germany; government-owned Renault, with 35% in France; Fiat, with 90% in Italy. When the Six first got together, there was widespread suspicion that the major European automakers would succumb to the Continental fondness for cartels and divide the car market into cozy segments. Instead, they have reacted like tiger sharks.

Fiat, which had long sheltered behind a tariff wall so high that even rich Italians could scarcely afford a foreign car, greeted the Common Market by slashing its prices at home and doubling its dealer force in the rest of Europe. Volkswagen, which before the advent of the Common Market regarded France and Italy as lost causes, now has plans for 120 French dealerships, and by relentlessly efficient servicing is slowly overcoming the longstanding Italian sneer that the beetle is brutta (ugly).

In Germany, France’s Renault is fighting to overtake Fiat as the most popular foreign car by offering “financing up to 24 months—with only 25% down.” From the outside, Ford is selling so aggressively in France that its English models outsell Volkswagen and all other foreign cars.

As they plunge deeper into U.S.-style competition, Europe’s automakers are abandoning their old tendency to concentrate on one class of car. Like Detroit’s Big Three, they are now making an effort to offer models suited to every pocketbook and taste. Volkswagen has expanded its line to include the medium-sized (for Europe) 1500 model. The luxurious Mercedes has acquired the pint-sized DKW, and English Ford has turned its Zephyr and Zodiac lines into luxury cars. In a curious alliance of two state-controlled companies, France’s Renault and Italy’s Alfa Romeo plan joint dealerships which will be able to offer the customer everything from a spartan $1,100 Renault R4 to a $20,000 custom-built Alfa sports coupé.

Readymade Giants. All European automen agree that competition has just begun. Some time before 1970, when all tariffs between Common Market members will finally disappear, the car population of Europe is expected to stabilize at about one car for every six people (v.

one for every twelve people now). Then, as in the U.S. market now, sales will depend primarily on replacement needs and population growth. Companies will probably have to make more model changes and get hep on trade-in deals.

Many Europeans believe that ultimately the European auto industry will undergo a Detroit-like shrinkage from the present 50-odd manufacturers to a handful of giant firms. Against that day, such native European firms as Fiat are keeping a wary eye on Detroit itself. For if Britain does join the Common Market, a merger of the British and German subsidiaries of Ford (Ford and Taunus) and a similar merger by General Motors (Vauxhall and Opel) could present Europe with two readymade automotive giants backed by Detroit’s vast reservoirs of money and skill.