New EU rules on car sales are failing to have the desired effects on competition, according to a leading industry spokesperson. Dr Jürgen Creutzig, president of CECRA, the voice of Europe's 108,000 franchised car dealers, says that, despite lower prices being one the main objectives of the new block exemption regulations, the opposite is happening.
"Prices have risen in the small markets and they have stayed level in the larger markets," he says. "Nowhere have there been reductions."
Dealers across Europe are demanding action to remedy the failures of the new rules which, they say, have allowed car firms to reduce rather than increase competition in the industry.
Speaking at a Society for the Irish Motor Industry (SIMI) dealers conference last week, Dr Creutzig, said there are now serious concerns over manufacturers' interpretation of the rules that will adversely affect both dealers and their customers. "Manufacturers have not applied the measures in the spirit in which they were intended," he says.
He told Ireland's franchised dealers that they were not alone in their fears over the new regulations and the new contracts that came with them. In Germany, some dealers have had their operating margins reduced by over one-third overnight, while across Europe manufacturers are taking over the distribution and retailing of their vehicles. In addition, as the small print of the new contracts is being analysed, dealers are finding that restrictions are being applied in areas where the new regulations were intended to create greater freedom.
One of the intentions of the new rules was to allow dealers to use agents to sell on new vehicles. However, one German manufacturer has written into its contracts that its dealers can do this only with its permission, while another German producer has prohibited the use of agents completely.
In some cases manufacturers have demanded that over 150 separate standards are met in order for dealers to retain the right to sell their brands. Although some of the standards, such as staff training and showroom area are essential, dealers are complaining that others are simply too restrictive and expensive.
One car maker has even specified the make and type of furniture to be used in showrooms. Another has demanded that only 1,000 watt bulbs be used. This all adds sgnificantly to dealer's overheads - and these costs will eventually filter down to the buyer.
Referring to some of the measures imposed on dealers, Creutzig said: "It's our view that manufacturers have tried to win back into the contracts what they have lost through the new rules."
CECRA is raising at least 50 clauses over which it has concerns with EU Competition Commissioner Mario Monti, who is responsible for the new rules.
In addition, questions are already being raised in the European Parliament where German MEP Werner Langen is suggesting that the new dealer contracts are restricting rather than improving competition.