To halt automotive ‘Market Pricing’ is a task for the ‘Monopolies Commission’.
Having tolerated years of responses to the question ‘How much?’, with ‘Market pricing’, Iain Robertson feels more strongly than ever that a major ‘con’ has been in operation that has driven upwards retail prices that are currently at runaway levels.
The ‘fixing’ of prices has long been recognised as a major crime. In brief, it means that approval is reached between participants on the same side of a commercial proposition to buy, or sell, products, services, or commodities, at a fixed rate. It also affects the control of supply and demand by way of maintaining market conditions at certain price levels. In essence it is restrictive commercial cheating that, if left uncontrolled, places the consumer in a parlous position. It is obsequious in its lowest form and damaging otherwise.
In 1956, the Monopolies Commission was constituted in the UK, off the back of the 1949 Restrictive Practices body. It has been a political football over the decades, with responsibility for its operation being passed to different governmental departments, until it became the Competition Commission on the 1st of April 1999. As an assurance of fair competition between businesses, its role was to benefit companies, consumers and the UK economy. In some respects, the latter area may be the one that can lead to politicians turning ‘blind eye’ to certain practices and, although unproven at present, may underpin some of the cronyism that has taken place in trading around the pandemic.
We have all seen, or even experienced examples of monopolising markets, some of which led to the financial ‘crash’ of 2008. Banks, property developers, service providers and manufacturers have all been accused of cheating in recent years. In the automotive arena, what commenced as the ingenious installation of emissions cheating devices in Volkswagen vehicles, led to the ‘Dieselgate’ affair that was so vehemently denied by VW’s rivals. Of course, the irony is that so many of them have also now been accused and proven to have created similar devices.
My most recent interest in market manipulation lies in new car retail prices. It commenced the first time that a carmaker introducing a new model refused to confirm its future list prices, riposting instead that it would be ‘market priced’. I found it to be an immensely irritating response. Yet, it provided a guide value, without upsetting any market advantage that the carmaker wished to protect by withholding the information until nearer to the public launch. Quite often, new cars are introduced through the media several weeks, or even months, ahead of their public unveilings. However, ‘market pricing’, rather than being an occasional journalistic irritant, soon became common practice, with the accompanying customary competitive excuses.
Interestingly, ‘competition’ is invariably the key criterion. It is for that reason a Ford Fiesta is priced similarly to a Vauxhall Corsa; a Hyundai i30 is almost the same price as a Ford Focus; or a top-spec Range Rover is not dissimilarly price-tagged to Maserati Levante. Of course, there are differences, class-for-class, model-for-model, but a simple expedient remains at play, each of them costs around the same as its nearest rival to produce, with one notable current exception: vehicles built in China, where Far Eastern labour rates are State controlled and significantly lower than in the West.
Prior to Volkswagen buying out Czech carmaker Skoda, the final products (S105 and Favorit) were among the least expensive cars sold in the UK. They reflected former Communist Czech labour rates, which were around 10% of German rates just across the border. Today, rate parity has been reached and Skoda motorcars are priced at similar levels to their VW, Seat (another low-price Spanish acquisition) and even upmarket Audi stablemates.
One of the lower priced cars sold in the UK today is the Dacia Duster, a popular SUV across Europe. Based on ‘previous generation’ Renault hardware, thanks to modest labour rates, it retails for Euros18,780 (£16,111) in Romania. However, by the time the ‘no-nonsense’ Renault product arrives in the UK, it is over £4,000 more expensive. It is ‘market priced’. Were several of the well over 150 car brands produced in the People’s Republic of China to be sold in the UK, you can be sure that market pricing would return in excess of 300% profit-on-return, such are the ‘slave labour’ rates paid to their production line workers.
Yet, I have not dipped into the EV market, which presently is offering no alternative fuel sources after 1st January 2030. While several carmakers have been attempting to differentiate and establish some distance between their ICE and EV models, to avoid obvious comparisons, an average of 35% increase in retail prices is making EVs ‘unaffordable’ for customers and living with some aspects, such as range availability (although it is improving), makes them a pain in the arse. Naturally, there has been talk of EV prices being reduced to close the gap but the truth is that ICE models are creeping up in price to achieve that same aim. While comprehending but not condoning an early, low volume, EV price inequality, as the consumer is going to have little choice but to go electric, milking the market is not fair trading.
Naturally, ‘market pricing’ ensures that the majority of carmakers are working their well-established routines across the entire EV sector…class-by-class, model-by-model…the oddball being Tesla, which has always done things its way, independently of market forces. However, not for one moment should you believe that EVs are anything but a poorly informed choice, where the prices are being fixed across the board by manufacturers that are normally so conscious of subsequent residual/trade-in values for their products.
Personally, I am not averse to commercial organisations making profit but profiteering is immoral. It is about time that the cosy little, ‘price fixing’ club established by the motor industry was burst wide open to reveal the true values and not the market enhanced prices that they charge the consumer. If the ‘Competition Commission’ had any balls at all, I would not be able to point an accusatory finger.
