Fleet News

Carmakers claim victory in block exemption debate

CAR manufacturers believe the European Commission has backtracked on the most radical of its ideas for reforming car distribution in the European Union.

The EC is due to publish its proposals for the future of car distribution - governed by a regulation called the block exemption - within the next few days, and senior sources in the automotive industry claim to have detected a softening in tone from the EC's Competition Directorate.

Competition commissioner Mario Monti originally adopted a hostile stance towards the block exemption, blaming it for maintaining the pre-tax price differentials between EU countries, and suggesting that manufacturers manipulate the regulation to maintain undue control of their dealers, thereby blocking cross-border trade.

But car makers now think the EC accepts the merits of avoiding a complete free-for-all in car retailing, and of ensuring that new car buyers have guaranteed access to an aftersales network for service, maintenance and repair work.

Nick Reilly, who had covered the block exemption issue for General Motors Europe before moving to Daewoo, said the debate had moved from the 'political to the practical'.

'The legislators now appreciate that current rules were not set up by the car companies. The EC will have to do something that seems to improve competition – but there's a lot of competition already – and it's likely to introduce new channels of selling cars, but qualitative criteria will remain,' he said.

However, manufacturers accept that in return for imposing qualitative criteria on their dealers, they will have to loosen their control over the exclusivity of their dealer network, and Joachim Eberhardt, managing director of DaimlerChrysler UK, sees further concessions on the horizon.

'Exclusive territories will fall away, manufacturer recommended retail prices will fall away, and we will have to supply independent repair shops with technical manuals and tools,' he predicted.

But established franchised dealers will still hold the upper hand, according to a report commissioned by the EC, that reported last month that price only becomes important in buying decisions when customers have absolute faith in aftersales service.

'The high value placed on after-sales servicing, as well as the importance of personal advice, shows that, when a new car is being purchased, the buying phase is already overshadowed by the expectations placed on the utilisation phase,' it said.

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