As the debate about the future of car distribution gathers
pace, SMMT today publishes a guide setting out the benefits of the current system
for consumers. Called Block Exemption – The Consumer Benefits, it explains
why the European rules, which were set up 16 years ago to protect new car buyers,
must be renewed in October 2002.
The industry is concerned that many of the benefits have become
clouded by arguments around new car prices in the UK. By explaining why price
disparities occur, as well as by describing some of the possible consequences
of scrapping the rules, SMMT hopes to encourage a more balanced debate among
stakeholders.
The truth about new car prices
The distribution rules have not changed significantly in 16
years and not at all since 1995. Exchange rates, on the other hand, continue
to fluctuate wildly while tax harmony in EU member states is non-existent. The
UK was one of the cheapest new car markets in 1995 but since then the pound
has strengthened.
The truth is that price harmonisation will never be a reality
until Europe stabilises the variables that distort the single market – currency
and tax.
Village shop closed, local dealer next?
A report, published by Accenture in September, warns that local
dealers may disappear if dealer territories are scrapped. The impact on rural
areas will be most severe, as local support is lost and mega-dealers emerge.
If the link between sales and aftersales support is cut, large repair centres
could also exploit a dominant position, reducing competition.
Driver, passenger and pedestrian safety
The rules apply to the supply and aftersales care of commercial
and passenger vehicles as well as cars. By the end of 2000 there were more than
3.2 million commercial vehicles on UK roads and 95,455 buses and coaches and
their care and maintenance must be entrusted to well-trained experts. Removing
the role franchised dealers have in aftersales care for these vehicles could
have serious safety implications for all road users, not just car owners.
Safety recalls
With clearly defined roles for manufacturers and their dealers,
response rates for recalls are very high, at around 85-90 per cent. Vehicle
owners have expert, local support for advice, safety checks and, if necessary,
repairs. But if franchised dealers are lost, the process may become muddied,
with poorer communication and more affected vehicles slipping through the recall
net.
Longer waits, less convenience
In the last five years, order to delivery times have been slashed
in Europe, despite a huge increase in model choice. Further progress in lean
distribution is likely in a clear manufacturer-dealer supply chain. But if the
links are scrapped, mega-retailers may sideline build-to-order systems in favour
of stock accumulation, affecting speed of delivery and availability.
SMMT chief executive Christopher Macgowan said, ‘This issue
is about the need for a system that benefits all stakeholders; it is not about
the industry protecting its interests. Governments across the first world recognise
that new car buyers must be protected which is why the same rules that apply
in the UK and the rest of Europe are mirrored by similar systems in Japan and
the United States. It would be easy to break the threads that link manufacturers
to their dealer networks. It will be less easy to pick up the pieces if vulnerable
consumers start to suffer.’
Notes to editors:
- Under the current block exemption rules, new cars and commercial
vehicles are supplied exclusively to franchised dealers. Each dealer operates
within a geographical territory, with networks giving nation-wide coverage.
The so-called sales/servicing link ensures full aftersales support is also
available. The rules, which apply throughout the EU, were first put in place
in 1985. They were renewed in 1995 and are being reviewed by the Commission
before expiry next October.
- Safety recall response rates tend to be much lower outside
the automotive sector. In a recall of an Early Learning Centre child’s microphone
toy, 35 per cent of all potentially affected items were returned to the store
following a high-profile campaign. Highlighting this recall, The DTI’s Consumer
Product Recall Good Practice Guide described the level of return as ‘acceptable’.
