Few rivalries are stirring up as much passion as that between two behemoths: the American and European automotive industry. Right from the get-go, gearheads have pitted American and European automakers against each other, and over time, each player has witnessed both spectacular successes and disappointments. But something that remained a constant in the past decades is the fact that the European cars available on the American market are on average more expensive than the American ones. Given that the automotive industry is a major contributor to the U.S. economy, accounting for 3 percent of the nation’s GDP and employing 923,000 people in manufacturing and an additional 1,251,600 workers in dealerships, the American automotive industry is a major economical force that commands respect. And yet, it loses the reputational battle against the European rivals.

American consumers tend to associate European cars with luxury, world-class reliability, over-engineering and technology prowess. Naturally, the positive reputation works in favor of the Europeans because they can command higher prices. Furthermore, most of the European compact cars sold in the United States come from Germany, Britain, Italy and Sweden, and known for their highly regarded and competitive automotive industries.

These European car manufacturers export their most recognizable models and extravagant car brands; thus, North American consumers won’t find brands like Dacia, Skoda, Seat or Citroën, which are notorious for producing reasonably priced but less dependable vehicles in North America. This means that Europeans can maintain their dominant position and stellar reputation intact because they deploy just the finest cars from their fleets. But there are several other reasons why American cars are cheaper than the European ones available in the U.S.

Related: This Is Why American Muscle Cars Are Cheaper Than European Sports Cars

Lower Energy Costs In the United States

While gas prices have skyrocketed in the past two years, reaching $3.909/gal, the situation is even worse in Europe’s major economies. Gas prices in Germany, for example, averaged $1.64/liter from 1995 until 2022, but then the price jumped to $2.36/ liter in May 2022. Last October, gasoline prices in Germany stabilized at $1.90/liter. Unfortunately, the situation is no better in France and Italy either. In France, gasoline prices were $1.75/liter in October, while in March, they reached $2.31/liter and in June $2.27/liter. It’s worth noting that between 1995 and 2022, gas prices in France averaged $1.68/liter. In Italy, gas prices were sitting at $1.78/liter in October, down from $2.26/liter in June 2022.

When it comes to electricity, the situation is not much better. According to Statista, the average wholesale electricity price in Italy surpassed $443 per megawatt-hour in September 2022, up from $70 per megawatt-hour in January 2019. In Germany, the average wholesale electricity price consolidated at $372 per megawatt-hour in September 2022, while in France, the costs reached $407 per megawatt-hour, during the same period. We predict some automakers will move production abroad if things continue to spiral out of control in the European Union, thus the U.S. has a chance to bring more foreign automakers to North America.

Lower Salaries For Automotive Production Workers In The United States

The automotive sector provides direct and indirect jobs to 13.8 million Europeans, accounting for 6.1 percent of total EU employment. This is a major force whose turnover represents over 7 percent of EU GDP. Given the power of the sector and the influence of trade unions in the European Union, organized labor unions have the strength and influence to fight for higher pay, more flexible hours, and safer working conditions.

Already in 2011, Forbes highlighted German workers made twice as much money as American workers. “The average auto worker in Germany made $67.14 per hour in salary and benefits; the average one in the U.S. made $33.77 per hour,” says Forbes.

An Auto Express exclusive investigation from 2017 put the estimated annual salary in Germany for automotive workers at $69,000 or $32.50 per hour, while the US estimated annual salary was $51,000. Meanwhile, in France, the estimated annual salary reached $76,600, according to the investigation.

“GM production jobs in the States are being offered with ‘maximum hourly rates’ of $24.43, pushing basic salaries to around $1,000 dollars per 40-hour week,” says Auto Express. “Wages differ hugely depending on location and whether factories are unionised. Some Tesla workers in California say they’re on $17-$21 an hour and are seeking closer to the average.”

Related: 10 Reasons Why American Cars Are Better Than European Cars (And 10 They're Not)

European Automakers Have A Good Reputation

European cars are famous for being these highly engineered, handling oriented, luxurious machines that also excel in design. Although this is not always true, global consumers see European cars as superior to American vehicles. Additionally, there is this general view that European cars are more reliable and have better fuel efficiency. Needless to say, the media and industry experts have debunked many of these concepts, but still the positive brand reputation persisted, leading to customer retention and more sales.