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Friday, 7 September, 2001, 12:26 GMT 13:26 UK
EU 'overhauls' car market
car price graphic
The European Union (EU) is to change the way cars are sold across Europe, in response to consumer pressure about high prices, a report says.

The EU plans to end the block exemption, which allows manufacturers to control which retailers sell what cars for how much, the report in the Financial Times said.

Manufacturers have warned this could lead to further job losses in the already troubled industry and plan to meet at the Frankfurt car show to discuss tactics.

But pressure is expected to remain high for the exemption to be abolished, as consumer groups and internet dealers attend European Parliament hearings next week.

If draft rules are presented to the European Commission by the end of this year, the earliest they could be changed is September next year.

Consumer groups argue that the block exemption is hindering competition.

European consumer group BEUC's Dominique Forrest told the BBC's World Business Report: "There is not enough competition in the car sector...the car block exemption is actually contributing to an inflating of prices."

"We have the widest possible choice of products, it suffices to look at showrooms today to see the range of cars has never been wider," Mark Grevin of European manufacturers' group ACEA said.

Draft plans

The plans are still in draft form, but are understood to allow multi-franchising, where competing brands are sold in the same showroom.

"The current regime has created problems and is not working in the interests of consumers. Pure renewal of the system is extremely unlikely," a European Commission official said.

The news presents a further blow to the car industry, preparing to meet in Frankfurt next week for the biennial car show.

The European car industry is suffering from overcapacity, with the slowing world economy curtailing demand for new cars.

Already Ford Europe and General Motors Europe and have announced plant closures and job cuts.

Manufacturers argue that ending the block exemption and introduction of an "unregulated retail industry" could lead to heavy job losses and the closure of smaller dealers.

High car prices

European legislators have faced pressure from consumers, particularly in the UK and Germany, about high car prices.

Research earlier this year from the European Commission suggested that new cars in the UK are up to 60% more expensive than elsewhere.

The UK was the expensive for 52 out of the 81 best-selling models surveyed.

The government introduced the Supply of New Cars Order a year ago after the European Commission and a succession of industry reports questioned the level of car prices in the UK.

In September last year, Stephen Byers , formerly head of the Department of Trade and Industry, ordered manufacturers to cut prices by 10%.

Byers' action followed a damning Competition Commission report into the car industry.

BEUC's Dominique Forrest
"There is not enough competition in the car sector"
ACEA's Mark Grevin
"The range of cars on offer has never been wider"
See also:

23 Jul 01 | Business
EU: Cars cost most in the UK
23 Feb 01 | Business
Buying cars on the web
23 Jul 01 | Business
Q&A: 'Rip-off' car prices
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