Just over two years ago, the European Competition Commissioner, Mario Monti, introduced sweeping changes to the way new cars are sold.
Commissioner Monti had laudable intentions: to increase competition in the new car market, and drive down costs. He was also determined to sever the link between sales and aftersales.
Monti said his changes would increase motorists' choice over what car they bought, where they purchased it, where they got it repaired and, ultimately, how much they paid.
But as the Commissioner set about smashing the traditional barriers to cross-border sales, so car manufacturers were left with no option by harmonising their prices on an EU-wide level because they were in effect being subsidised by the car manufacturers in order to compensate for Ireland's high Vehicle Registration Tax (VRT).
Car manufacturers argued that they needed to stop cars being sourced in countries with low pre-tax prices - such as Ireland - and exported to countries such as Britain, which has no registration tax. Under EU law, tax is payable in the country of use irrespective of the point of vehicle purchase.
The loss of the manufacturer's subsidisation had an immediate effect, and new car prices here rose. There are only three EU countries - the Netherlands, Denmark and Greece - that apply higher registration taxes than Ireland, and in those countries prices have risen, while in countries with lower vehicle taxes, prices have remained static.
Nowhere in Europe have new car prices fallen as a result of Monti's efforts. "We underlined what the outcome of the new regulations would be a number of years ago," explains Cyril McHugh from the Irish motor industry representative body, SIMI. "We warned that harmonisation would mean higher prices here, and called on the Government to reduce VRT to compensate."
According to PricewaterhouseCoopers and eurocarprice.com, Irish motorists are now paying on average 31 per cent more for their new car than consumers in other euro countries. One Dublin dealer says the new regulations will continue to mean more expensive cars for Irish motorists, pointing out that this is the government's, rather than the industry's, fault.
"Price harmonisation has nothing to do with the dealer," explains Gaetano Forte, managing director of Sweeney Forte, a former Fiat and Alfa Romeo dealership. "Ireland's high retail car prices are a result of the Department of Finance's insistence on applying a registration tax."
Despite repeated calls by the motor industry and the EU for Ireland to abolish the tax, the Government, which gets €800 million annually from VRT, is showing no sign of doing so.
Monti also hoped that the hold manufacturers had over their dealers would be reduced. "A wet dream" was how one multi-franchise dealer in Belgium described the Commissioner's attempts.Frank Hermans, a Belgian dealer with franchises for Ford, Land Rover, and MG Rover, has had to cope with 17 new franchise dealer contracts since the changes came into force. These contracts specify, in exacting detail, the standards he must meet in order to remain a franchise dealer for each marque.
With many dealers already operating to tighter margins - some manufacturers have also cut their dealer margins by one-third - that added cost has forced some to walk away from the new car business altogether.
Irish dealers see the new Block Exemption as a double-edged sword. "On the positive side, standards and facilities have improved," says Gaetano Forte, who decided to give up his franchise rather than accept the conditions laid down in his new contract. "But on the negative side these new standards have been very costly to implement."
Meeting the new standards has forced many dealers into millions of euro of debt. In Ireland, it is estimated that dealers have borrowed in excess of €260 million in the last two years to build new showrooms that meet the new standards.
Now dealers are looking for ways to recoup these substantial costs. Ian Macneill, managing director of the Foster Motor Company, says dealers must scrutinise and streamline every aspect of their business. The idea of increasing car prices to pay for their investments is not an option. "The only increase that consumers will see is due to the harmonisation of prices across Europe, and Irish motorists will not see the benefits of harmonisation until something is done about VRT," says Mr Macneill.
"It is up to us to cut out waste and inefficiencies and keep our costs in control, so we can continue to offer our customers value for money." Competition, he says, is fiercer than ever and the new trends are emerging that will make it even more competitive. "We are seeing areas where new showrooms are being concentrated. Look at Sandyford - we now have 12 competing brands in one small area, that can only be good for competition."
There is still, however, some bitterness about the new rules. "The new Block Exemption was great in theory, but in practice it isn't working," claims Gaetano Forte. "The manufacturers have insisted that everything is done to the letter, it's going to be all to their advantage."
Anthony Neville from the OHM Group, the Irish distributor of several marques including Jaguar, SEAT and Chrysler, refutes this. "We have had to enforce and implement the standards set by the manufacturers, we don't decide if a dealer has met them, it is done by an independent auditor. We have no flexibility." The OHM Group has seen its dealer networks reduced, as have other distributors. "Some of our dealers have said there is no way they can meet those standards," explains Mr Neville. "That has been very hard for us . . . but at the end of the day we will have a better dealer network, and there will be much higher standards for customers."
The new regulations also opened up the servicing arena. Now motorists can have their car serviced where they like, without affecting the warranty, provided the parts used are of a similar quality to those used originally.
However, the independent centres are accusing some manufacturers of stalling under their obligation to provide the technical information they needed to service vehicles.
Monti also opened the way for franchise dealers to source their spare parts from independent suppliers. The hope was that the cost of a service would fall as dealers began to source similar quality parts from a variety of suppliers.
But things are slow to change, as Hermans explains: "Most manufacturers have a stranglehold over their dealers and it is only the large dealer groups that have some degree of independence. There is also the rule that you don't bite the hand that feeds you."
But Irish dealers are beginning to test these new waters. "This will certainly lead to cheaper parts as competition opens up," remarks Mr Macneill. "This means that the cost of getting your car serviced will definitely come down."
This time next year, the final part of Monti's changes comes into force when the location clause is abolished. This means existing franchise dealers can establish "delivery points" in other EU countries and in their competitors' territories. Competition will become even fiercer and some dealers are clearly concerned.
"Nobody knows what the standards for the delivery points are," says Hermans. European dealers are pressing to have this delayed until the issue is clarified. "But we must all still prepare for the change when there will be more opportunities, but also more risks."