VERONA, Italy -- Reducing costs for carmakers and dealers should be the goal of any future rules governing vehicle distribution in Europe, a top European official said.
“Profit levels of almost 3 percent (of sales) for automakers and almost 1 percent for retailers are not sustainable, thus future distribution rules should reduce costs and increase efficiency,” said Paolo Cesarini, the head of the European Commission unit in charge of competition in the auto sector.
Cesarini spoke here May 14 at the 2009 Automotive Dealer Day event.
The EU must decide on the future of the auto industry's block exemption. The current regulatory regime gives automakers, car retailers and repairers an exemption from EU free-trade rules.
The current exemption ends May 31, 2010.
Cesarini declined to say whether the current rules would be revised and extended or scrapped, which would leave the auto industry to abide by the same rules that cover other industries.
Last month, EU Parliament member Christoph Konrad, who participated in the decision-making process for the current block exemption enacted in 2002, said the Commission appears ready to extend the block exemption past May 31, 2010.
Two strong possibilities
Konrad said two variants of the regulation have an edge in the discussions: One option is for Brussels to apply a more general umbrella block exemption, "which then will be augmented with sector-specific guidelines for the auto industry."
The other option is for an automotive block exemption similar to the current one, but "streamlined." In this case, dealer protection provisions relating to new-car sales would be eliminated.
The aim of the current rules was to increase competition between and within brands as well as promote innovative ways of selling cars.
The rules guarantee dealers and repairers certain contractual rights, access to arbitration, and the sharing of technical information. They also make it easier for dealer groups to establish multifranchise sales facilities and open stores anywhere in Europe.
Opinions about the block exemption still vary widely. Most automakers would favor lifting the exemption while authorized dealers oppose any change to the existing regulation.
Independent dealers are mostly neutral, and consumer organizations oppose stricter trade rules.
Despite all the different opinions and ideas, Cesarini said that rules will exist and that no one should fear that European auto distribution will “become a jungle.”
Cesarini admitted that some of the results of the current rules have been is radically different from what was expected.
For example, the introduction of the so-called “location clause,” which gave dealers the freedom to open a sales or delivery point anywhere in the EU, was delayed two years because retailers feared it would disrupt the sector.
“Reality showed this was not such a big issue,” Cesarini said, because very few dealers opted to expand outside their borders.
The new rules also let automakers require dealers to meet a common set of standards throughout Europe. This change was supposed enhance the look and performance of existing dealers and protect them against newcomers.
“Many automakers tended to impose excessive standards, that became an added burden instead than a protection (for their existing dealer network),” Cesarini said.