No one knows for sure how auto retailing will change if the block exemption - the special set of rules governing European car distribution - is removed.
But change is certain. Reporter Bradford Wernle conjurs an imaginary world of Ikea cars, large repair chains, unruly dealers and buyers who bid for cars online.
Many in the auto industry expect European Union Competition Commissioner Mario Monti to recommend an end to the rule that allows carmakers to control their distribution networks in Europe.
In a report issued on November 15, Monti said the so-called block exemption had stifled open competition in a free market.
Block exemption is based on the notion that automobiles are complex pieces of equipment that require special knowledge to sell and to service.
Manufacturers, dealers, consumers and other parties have until January 16 to respond to Monti's report. A hearing will be held in February. Monti will make recommendations for changes to block exemption later in 2001. The exemption expires on September 31, 2002. The following is a fanciful view of how the world might look in the years after that date.
IT IS JANUARY 16, 2006, and WalMart/Asda stores in the United Kingdom and Germany are holding a special sale this week on the Fusion, Ford's hot new all-purpose people carrier built on the Focus platform.
The supermarket chain ordered thousands of Fusions from Ford at a bulk price. The cars are specially equipped for WalMart/Asda and can't be bought with the same
specification anywhere else.
The Fusion is one of only three popular Fords currently on sale at WalMart/Asda. People who want to buy other, slower-selling models will have to look elsewhere. That's because, with the end of block exemption, independent retailers are now able to pick and choose the cars they wish to sell.
Welcome to the brave new world of automotive retailing after the end of block exemption.
If you've spent the last six years in a time capsule, you'll find that the retail car business is almost unrecognizable. The landscape has been transformed completely.
Many traditional dealers retired or sold their stores to large groups. They were intimidated by the retail free-for-all that occurred once auto manufacturers lost the right to dictate who sold their cars and where they were sold.
Meanwhile, carmakers long for simpler days when they controlled their own hand-picked dealers - before the block exemption expired on September 31, 2002 and was not renewed.
Retailers such as WalMart/Asda, along with e-commerce specialists such as Virgin Cars and jamjar.com, have become more powerful because they now have gained the right to pick and choose the brands and products they sell.
American chain AutoNation has joined with UK dealer groups such as Pendragon to seize opportunities in continental Europe. These big groups have bought up hundreds of franchised dealerships, and now exert tremendous influence on carmakers. They now have a big voice in dictating what kind of products the carmakers produce, and the prices they sell those products at.
Margins on new cars, already slender before the abolition of block exemption, keep getting thinner. Carmakers and their remaining franchised dealers have sought to compensate by finding ways to make money from parts, service, finance and insurance.
Some strange bedfellows have entered the car-retailing scene. Ikea, the big Scandinavian furniture company, is selling its own Goforitt brand of automobiles as a functional, low-content car for working people. These vehicles are especially made for Ikea by Daewoo, which General Motors bought and changed into a contract maker of house-brand vehicles for large retailers.
With all this competition, price discipline evaporated. Manufacturers are trying a new concept - auctioning big allotments of new cars to dealers over the Internet. Prices change hourly, and price-conscious customers can bid on a vehicle at the click of a mouse.
Customers now glean all the information they need on product by surfing the web. But big electronic retailers acknowledge customers still need to test drive vehicles. So they're building test drive centers at the edge of cities. The centers resemble miniature theme parks, with entertainment centers and rides for kids. They offer comparative test drives of different vehicle brands so customers no longer have to shuttle from one dealership to another to sample all the offerings.
The largest dealer groups mainly sell volume makes such as Citroen, Fiat, Ford, Opel, Peugeot, Renault and Volkswagen. In today's world those brands are more like commodities and tend to sell better in the new multi-brand retail channels allowed by the removal of block exemption. They have introduced new ownership concepts, allowing customers to rent or lease vehicles for different seasons of the year - convertibles in summer and sport-utilities in the winter, for example.
Luxury brands are sticking with more traditional dealerships, but they are grouped in large multi-brand dealer sites such as those operated by Ford's Premier Automotive Group. They offer more specialized services, such as pampered trips to the factory to collect vehicles.
The end of block exemption has opened up the parts and service sector to more competition. Large repair chains work on any type of vehicle, warranty work included. They can do so because the end of block exemption also ended the exclusive right of dealers to handle warranty work. Manufacturers were forced to give up access to the electronic codes needed to diagnose the highly technical problems posed by modern vehicles.
This growth of big repair outfits has radically reshaped the aftermarket parts business and thousands of independents closed their doors.
The parts area is a source of controversy. Courts must resolve who owns individual parts designs. One chain was fined for fitting bogus parts to Opels under the guise of doing warranty work.
Big independent repair shop chains now compete with names like Renault's Minut, Fiat's Midas and Ford's Kwik Fit, which have expanded beyond their traditional light-service capacity to compete in the warranty and heavy-repair business.
These repair centers feature a few highly trained, salaried diagnostic engineers who direct an hourly work force of mechanics. They earn less than their forerunners at traditional franchised dealer repair shops. Overall labor costs have been dramatically slashed. Customers, who had felt ripped off by dealer repair operations for years, are happier.
The repair centers carry not only official carmaker parts, but also parts produced by independent suppliers such as Visteon and Delphi or their own brands.
So was the end block exemption a good thing? The picture is still chaotic, and many problems remain. Taxes across Europe have not yet been harmonized. And some countries such as Denmark and the UK remain outside the euro zone.
Customers, who had asked for more choice, found themselves with almost too much of a good thing. But nothing in this new world has settled yet. Only one thing is certain - more change is just around the corner.