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New car discounts abroad: Ruinous price war in Europe?

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G If it's about pithy sayings, then Fiat-Chrysler applies -Chef Sergio Marchionne as not squeamish. So far, however, his statements have caused little noise in the industry. But the statement by the Italian-Canadian car manager at the end of July that rival Volkswagen was causing a 'bloodbath' on the European car market with its discounts sparked a solid dispute. Visibly piqued, VW rejected the allegations.

The dispute between VW and Fiat comes in the middle of the sales crisis. An accident? Not at all. The conflict shows how tense the situation is at the moment. Because in order to secure market shares on the continent shaken by the euro crisis, the brands have been struggling with increasingly harder bandages for a long time. But the increasing new car discounts are becoming a problem for managers. Just recently, Ford Germany boss Bernhard Mattes openly stated what his colleagues from other brands only talk about in small groups: He warned of a ruinous price war in Europe.

20 percent fewer new cars sold in Italy

Given the ongoing euro crisis, it seems questionable whether it can still be stopped. A look at the five largest EU markets already suggests this: three out of five countries recorded a decrease in approvals. While Great Britain and Germany finished the first half of 2012 in positive territory, the manufacturers were able to sell around nine, in France more than 14 and in Italy even 20 percent fewer new vehicles compared to the previous year.

Above all, volume manufacturers are trying stop the decline with new discount programs. Cheap and flexible loans such as zero percent or three-way financing, extended guarantees, free maintenance policies or special models with a price advantage of up to 5,000 euros are available in all countries. In addition, the industry attracts with other campaigns: For example, Fiat in Italy grants an Ecobonus of up to 5,000 euros for LPG and CNG models, Nissan at least up to 4,000 euros.

VW and Nissan give customers VAT as a gift

Because VAT in Spain rose from 18 to 21 percent, it is given to VW and Nissan customers for free. Ford made up for the difference and added a 25 percent discount to the Fiesta and Focus. In France, the state wants to promote electric and economical cars. Hence there isRenault 7,000 euros electric bonus and up to 550 euros for low-carbon models. The industry in Europe also works with daily registrations, which is hardly surprising. After all, the estimated more than two million overproduced cars can be pushed into the market at high discounts. With us alone, every third new car is currently supposed to be sold in this way.

And what about the premium manufacturers? So far, they have been largely spared the sales crisis and the price war it has caused, but they are worried about the future. 'The risks are increasing rather than decreasing', BMW boss Norbert Reithofer paints a gloomy picture.

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