Driving the future of car distribution in Europe

09 November 2001 #SMMT News

As the debate on the future of motor vehicle distribution continues

in Brussels today the Society of Motor Manufacturers and Traders (SMMT) offers

the following comments on four key issues:

1. The market must be regulated to protect consumers

Cars are complicated mechanical products requiring service

and support by technicians with specialist knowledge and equipment. It is therefore

unworkable to have an unregulated market in which anyone can sell and service

any make and model of vehicle they choose. Manufacturers and dealers spend billions

of pounds ensuring that franchised dealers across the EU can deliver high quality

service to customers on what is a safety-critical product.

If it were possible to deliver the same consistently high standards

through any other system, it would have emerged somewhere in the world. It hasn’t,

and that is why every major market is controlled by a set of rules (known in

Europe as Block Exemption) governing the supply and distribution of vehicles

to provide the highest degree of consumer protection.

2. A network of franchised dealers guarantees standards

and service levels

The Europe-wide network of manufacturer-backed dealers exists

to ensure that wherever consumers see the vehicle brand legitimately displayed,

they are guaranteed to receive the highest possible standards of service and

repair. In an unregulated market, where would consumers turn for the same level

of service, repair and a ready supply of spare parts? It could become a gamble

with consumers resorting to ‘telephone-directory-roulette’ to find a qualified

technician, in the absence of any franchised dealerships. One concept being

proposed to answer this issue is the creation of a new Europe-wide watchdog

body to regulate all service centres. Why create yet another Brussels-led body,

when the current system established over 100 years works to very high standards,

and has clear rules and governance.

3. The internet is an important part of the distribution


The entire automotive retailing landscape has changed in the

last few years since the internet has become part of contemporary life. Customers

use digital technology to compare and contrast vehicles, specification, price,

delivery times etc. This new form of competition has been embraced by the industry

and it will continue to ensure that everyone is focused on delivering greater


The challenge faced by regulators is to ensure that the open

nature of the internet is not abused by any unscrupulous operators who may deceive

customers with bogus offers and take credit card deposits, only to fold and

disappear for good. A rising number of customer complaints of this nature will

have to be addressed in the new set of regulations.

4. Distribution rules have no impact on car prices

There have been many claims that the current system of distribution

leads to the UK consumer paying higher prices for cars.

That is quite simply and categorically not true.

The distribution rules are Europe-wide, apply equally in every

country so, it is impossible for them to be apparently ‘bad’ for UK customers

and yet apparently ‘good’ for non-UK consumers. European Union law over-rides

national law and does not discriminate against specific nation states.

The reason for any variation in price across national boundaries

is quite clearly down to the well-known factors of currency and taxation. It

will only ever be addressed if Britain were to join the single currency and

have true tax harmonisation.

Those who claim the distribution system is the reason for any

price difference have either no grasp of European Law, or are being deliberately


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