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Tuesday, 5 February, 2002, 16:22 GMT
Brussels shakes up car market
Car dealership
Car prices could fall, but probably not for a while
The European Commission has unveiled radical proposals to change the way cars are sold and repaired across the EU.

Officials claimed that the proposals aim to promote consumer rights, and dismantle the power of car manufacturers.

Car prices in Europe:

UK consumers pay higher pre-tax prices for cars than anyone else in the EU

Car makers often charge less for cars in countries where motoring is taxed heavily, for example Denmark and Greece
"The Commission is putting car buyers first", Commission President Romano Prodi commented.

"People want a real choice. They want to buy cars and obtain services wherever it is most advantageous, to have a choice of brands and models, and to have high quality after-sales servicing at a reasonable price."

But the plans were condemned by German chancellor Gerhard Schroeder, who warned they could prompt job losses in the country's influential and troubled auto industry.

Proposals for change

Currently, the car industry is exempt from normal European Union competition legislation under the so-called block exemption arrangements, which are due to expire in September.

German Chancellor Gerhard Schroeder
Schroeder will resist some proposals
The Commission's proposals for a replacement regime should enable car dealers to sell more than one brand of cars, as long as they are kept separate on a dealer's premises.

The changes should also make it easier for independent garages to service vehicles and allow dealers to both sub-contract repairs and buy spare parts from sources other than the main car makers.

Car dealers' obligations to service the cars they have sold are to be removed.

The pre-tax price of Mazda 323:
10,525 in the UK
7,404 in Greece
6,266 in Denmark

Source: European Commission, July 2001.

The changes should help make it easier to buy cars across European borders, including via the internet, and this should help reduce price differences for the same cars sold in different EU countries.

Car makers may be asked to offer dealers similar volume discounts to those offered by fleet buyers.

Car suppliers could also be asked to remove contract-hire price differences between private and fleet buyers.

Block exemptions

Both consumer groups and non-traditional car dealers, such as car supermarkets and online showrooms, have long argued that the current block exemption rules have robbed consumers of choice.

But the European car industry has objected strongly to the Commission's intentions to change the rules, as have some European governments.

UK pre-tax prices compared with the EU average:
Citroen C5:
24% dearer
11% dearer
Ford Mondeo:
31% dearer

Source: European Commission, July 2001.

The car makers want to avoid supermarket-style car showrooms owned by independent car distributors, arguing that consumers would lose out if specialist after-sales care was put at risk.

Mr Schroeder told Opel workers that "the destruction of the block exemption would bring huge competitive disadvantages to the German car industry".

Parts of the commission's proposal would meet with resistance from Germany, he said during a visit to a new Opel factory.

"Whoever intervenes in a tried-and-tested system in the name of competition must be aware not only of what they're promoting, but also of what they're destroying," he said.

Analysts say the commission will probably not fully liberalise the car market, and they believe the changes will have little effect for car buyers anytime soon.

If accepted by EU governments, the Commission's proposals would come into effect on 1 October this year, though there would be a year-long transition period to allow manufacturers and dealers to adapt.

European Commission President Mario Monti
"The proposals will inject a massive dose of competition"
The BBC's Rory Cellan-Jones
"The European Commission says that motorists could soon be benefiting"
Berndt Gottchaldt, German motor industry federation
"The margins we...are having in this business are not very good"
Emma Harrison of the Consumers Association
"A great victory for consumers"
See also:

07 Jan 02 | Business
UK car sales hit record
04 Jan 02 | Business
BMW harmonises euro prices
13 Dec 01 | Business
Car sales rise in Europe
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