Fleet News

EC's retail proposals 'will change nothing'

The European Commission's long-awaited proposals for the future of car distribution in Europe will do little to cut prices for fleets or private customers, leading industry figures are warning.

After years of conjecture and speculation, the EC president Romano Prodi finally unveiled his plans to change 'block exemption' - as the current laws are called - in early February. They were expected to liberate the manufacturer-controlled market, opening it up to new competition and forcing down prices.

One of Europe's leading auto industry academics, Professor Garel Rhys of Cardiff Business School said the recommendations were 'completely reprehensible'. The proposals, in theory, will permit:

  • New multi-brand dealerships, with several brands under one roof
  • Freedom for dealers to sell abroad
  • Manufacturers to decide if they want to supply supermarkets or internet sites
  • Manufacturers to decide between two dealer structures: First, whether dealers have allocated sales territories, or whether manufacturers supply all dealers who meet their set criteria

    Consumer groups reacted positively to the announcement, claiming that prices would fall.

    But Professor Rhys said the reality would be somewhat different: 'After two years of posturing, the EC has basically just renewed the old block exemption,' he said.

    'It's what happened in 1985 and 1995. They promised that prices would fall and cross-border retailing would be encouraged, but in practice not much will happen.

    'Manufacturers will retain control over the retail channels, and fleet and private buyers will probably be unaware of any major changes. The EC is claiming a lot, but not a great deal will happen'

    Potentially, the new structure should allow a dealer in a cheap pre-tax country like Denmark to sell in an expensive pre-tax country like the UK or Germany.

    This should allow him to sell a Ford Focus 1.6-litre three-door costing 9,317 Euros in Denmark for 13,357 Euros in the UK, before tax.

    But critics of the proposals say manufacturers will never allow such an imbalance to happen. Most say manufacturers will move to harmonise prices by rounding cheap prices up rather than expensive prices down.

    Professor Rhys said manufacturers would also penalise any dealers stepping out of line: 'Manufacturers will still have the power to approve sales or not - so dealers who try and exploit the cross-border pricing differential could find their contracts terminated.' This is exactly what happened in 1995, when European authorities last tried to open up the market.

    Car manufacturers and franchised dealers are privately celebrating a huge victory for the established trade. Professor Rhys said the car makers 'couldn't believe their luck.'

    One senior executive for a leading European manufacturer said the proposals 'could have been much, much worse. We always said that the current block exemption provided the best structure'.

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