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Citroen offers C1 car for €7,990

Cut-throat price wars start as manufacturers battle to revive sales

CITROEN has launched a new round of car price wars in Europe as it tries to revive sales that fell 17% in August – by pricing its new C1 city car at just €7,990 after bonuses have been deducted.

As manufacturers lifted the wraps on a flurry of new models at the Frankfurt Motor Show, carmakers revealed a raft of offers to boost sales.

Citroen’s C1 hits the €7,990 price after slapping on an "ecological bonus" of €200 plus a "green premium" of €3,710 if the buyer hands in their old car that is more than eight years old.

Ford is offering a discount of €4,110 on its Fiesta model and offering to pay a premium of €1,000 to owners who hand in their old car, plus another €1,000 if the car is more than 10 years old. That means a new Fiesta could cost just €9,490.

Volkswagen, which for a long time resisted slashing prices, is not quite so bold but manages to keep the starting price for its Passat family car, including discounts and premiums, to €22,030.

Different style deals are also available, with South Korean maker Kia offering free maintenance for seven years to anyone who buys its Carens multi-purpose vehicle.

And its compatriot Hyundai is offering to insure its French customers against a potential loss of job for up to €300 a month, plus personal coaching to find a new job.

Yves Lacroix, analyst at Euler Hermes, said: "With the market still characterised by overcapacity and manufacturers seeking to hold on to market share, there are a lot of discounts which means that mass producers are losing money in Europe.”

Such aggressive commercial practices are difficult to quantify and compare because of the many different forms they can take, but analysts at Observatoire Cetelem said they enable households to save up to 11% on the purchase price of a new car.

The eurozone's economic crisis and rising unemployment in a number of member states "have a direct impact on household sentiment and customers are loathe to make any large-scale purchases," putting considerations such as safety, design and comfort lower down on their list of priorities than price, the study by Cetelem found.

Analysts are projecting a 5% decline in the European car market this year – with mid-range cars being hit the most because they are now frequently too expensive.

Top-of-the-range models were able to resist the price wars for a long time, but are no longer proving immune and Benard Jullien, a director at Gerpisa, said entry-level models in the premium segment "are much cheaper than in the past”.

One sector seems to have escaped the slide in sales, as he said: "Low-cost vehicles continue to see strong and robust demand among customers. Here, there is actually a situation of under-capacity. It's a segment where makers don't have to sell their vehicles at cut prices.”

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