By on July 13, 2011

In 2003, when I had a different (and much better paying) job, I wrote for the umpteenth time: “This law makes Europe the most liberal car market in the world, more liberal than the freewheeling  U.S. car market.” Of course I was cheating a bit, because as we all know, the U.S. car market is anything but freewheeling. “This law” was the Block Exemption Regulation, BER for short.  It allowed any EU dealer to sell any car, allowed non-branded parts in branded dealerships, and allowed any workshop to perform warranty repairs on your car.  That came with a big IF: IF the new car dealer complied with the standards set by the brand and IF the workshop complied with the service standards of the brand. Even these last vestiges are now going away, turning the supposedly socialist Europe into a land of unbridled car capitalism.

When the BER came in effect in 2003, it had a sunset period until 2010, when the only controlling forces would be supply and demand. After serious lobbying, the period had been extended until 2013. This will be it, however. After 2013, anyone can truly sell and service anything. The standards had kept the dealers in line and prevented supermarkets from selling cars. The specter of “supermarkets selling cars” had been successfully used to enact the BER in the first place, and to extend it for a few years longer.

What the BER did was spawn big multibrand franchises. Automotive News [sub] cites a dealer Luxembourg, Autopolis, which has 12 brands under one roof. Tricky dealers secured one or two new car franchises by complying with the tough and expensive new car standards. Then they applied for service contracts from other brands by complying with much laxer and less expensive service standards. This allowed dealers to put logos up, and they could happily sell and service the cars, because no outsider would know the difference between a full and a service only dealer.

Now, says Automotive News , “dealer executives warn that the ending of the auto industry’s exemption – or “safe harbor” from EU competition rules – will give automakers even more influence on new car sales than they already have. In particular, automakers will seek to reverse the trend toward dealers selling multiple brands from different manufacturers in single showrooms, dealers fear.”

This of course is utter bunk. In the future, cars will fall under the same competition rules in Europe as washing machines. Manufacturers had fought the BER with teeth and nails. They successfully lobbied for an extension. Now, manufacturers will lose the whip of expensive standards. Manufacturers and dealers can agree on a code of conduct, but the code may not violate tough European competition laws.

What dealers should fear is disintermediation. Large automakers in Europe have quietly bought up large dealers when they got into trouble. When Volkswagen bought Porsche Holding Salzburg, they didn’t buy Porsche as many assumed, but the sole Austrian importer of all things Volkswagen, and one of the largest car dealer groups in Europe. This was already legal since 2003, but now, all bets and gloves are off. If automaker can’t control dealers anymore, they will create their own distribution channels.

Speaking of Porsche, the real Porsche just cancelled all dealer contracts in Europe with 24 months notice. June plus 24 months equals June 2013.

 

 

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19 Comments on “Soon, Anything Goes At Europe’s Car Dealers...”


  • avatar
    Acubra

    Selling is one thing, servicing is different though. With ever-increasing amount of strictly proprietary onboard electronics and software in cars, repair facilities would have to invest more and more in brand-specific tooling and software (and personnel training), making multi-branding cost-prohibitive.

    • 0 avatar
      aristurtle

      Or, worse, it’ll go too far the other way: you’ll go to Wal-Mart, buy a Chinese-made Durabrand Great Value badged hatchback for $2500, and when it breaks down, you’ll throw it away and get a new one, like you do for their vacuum cleaners, sewing machines, televisions, and power tools. Remember back when people repaired televisions?

    • 0 avatar
      TheEuropean

      Funny thing is: Even your “no-brand” repair shop can do that…it’s weird. A BMW dealer has to pay 50.000 € for a OBD-Software/-Hardware at BMW while the “non-brand” shops get it for 5.000 € in the free market. (well, it’s without a BMW sticker on it but does the same thing)…moreover there’s a law that REQUIRES all manufacturers to give free access to every repair guide, software and training!

    • 0 avatar

      Servicing might be going the way of the dodo, or so, say, Best Buy may think. It’s just selling cars. You know how much less servicing there is with EVs? The BMW i-thing is meant to be easy. (Gas cars are already easy) (Of course BMW dealerships fixing 5s won’t go anywhere, but EVs bounding about means EASINESS for cars).

      I think Costco or something wants to do cars. And with Best Buy, it’s ones with Samsung batteries. It’ll be informal.

      Are some companies betting on big transportation to commodify soon? It’ll be like wireless internet, sort of. Cars everywhere. There’s lots of cars, everyone wants you in a car. And you can buy it at Wal-Mart if you want to.

      How often do you fix your computer? Even if it was a gas-powered computer.

      • 0 avatar
        Acubra

        So you computer has gearbox, suspension, lights, airbags, tons of electric motors, actuators and microprocessors? And you keep it in the street exposed to the elements?
        Also how ’bout your computer not allowing you to do upgrades or software installations/deletions?

  • avatar
    TheEuropean

    Not only Porsche has cancelled all dealer contracts: So has LandRover, Jaguar, Peugeot (Second biggest car maker in Europe!), Citroen, Suzuki…others, like Opel or Toyota have “changed” dealer contracts “in compliance” with the dealer (“If you don’t give us what you want, in 2013 you’re no longer a dealership!”)

    Volkswagen is really sneaky in these things. Not only have they bought the Porsche Holding (btw which was formerly owned 50% by the Porsche family and 50% by the Piech family and not only important in little Austria but also the major import company for all VW-Company cars in all of Eastern Europe and parts of Southern Germany) but also e.g. MAHAG Munich. MAHAG was a huge dealership (some 30 dealerships) in the Munich area and…nobody would say this openly, but Volkswagen let them go down.

    MAHAG had gotten in some big trouble with the value of returned leasing cars from AUDI, VW, Skoda and Seat. Even though they based their value estimation on what VW told them in their computer systems, they lost several thousand dollars on every car returned. (My English is not all that great; for a better understanding: You lease a MSRP 30.000 € AUDI, pay 10.000 € in leasing payments in 3 years (since this is what the computer told the sales person at the dealership) and after that period return it to the dealer. Well, the car should be worth 20.000 € for the dealer to make money, right? Well in most cases it wasn’t even worth 15.000 €. Now multiply this with 1.000 cars that are being leased to customers in big dealerships like MAHAG and there you are: 5.000.000 € in value gone.)

    Volkswagen wouldn’t help, but rather “rescue” the company – through buying it. Poor them.

    There are several examples of this in Germany…the very low value of returned leasing cars compared to what the lease taker had paid for a car killed many dealerships. Those who always hailed VW got rescued. The others “died” or – if big and profitable enough – where bought by VW…

    Now, in what way is this an “open” marked ;)

    • 0 avatar
      SP

      This is very interesting information.

      I am wondering, however – Why would MAHAG, or any dealer, take VW’s word on what the residual value of a car would be?

      I think one should do one’s own research before making a decision that means life or death for one’s business.

  • avatar
    rpol35

    “Of course I was cheating a bit, because as we all know, the U.S. car market is anything but freewheeling.”

    What’s not freewheeling about it?

    • 0 avatar
      aristurtle

      The ridiculous protection racket that dealers have. Why can’t I order a car straight from the Ford website, pick out my options, figure out financing, and have them just ship it to my house? I can do that with Dell! But not Ford, because car manufacturers aren’t allowed to sell directly to customers. There’s a similar racket with wine and beer distributors in many states: the winery must sell to a distributor, who must sell to a retailer, who must sell to a customer, and the chain of useless middlemen is required by law.

      • 0 avatar
        rpol35

        aristurtle:

        I took Bertel literally when he said “market”. In the U.S. there are a lot of choices available inspite of U.S. emissions and safety regulations. You can buy a lot of different vehicles from a lot of different manufacturers, even more if you go gray market.

        What you are referencing is the “distribution” channel, not really the market. I see your point to an extent but I wonder if you don’t end up with a more competitive deal by being able to shop dealers as opposed to paying Ford whatever they deem is today’s going price. Also, hard to test drive a car over the internet.

        Other than putting up with the sleazy dealership experience, I don’t see a disadvantage.

      • 0 avatar
        stuki

        It’s getting like that in almost every industry in the US. As soon as the unscrupulous realized there are enough suckers stupid enough to eat the “market failure” scam hook, line and sinker, the floodgates were opened. And as soon as one idiotic law is in place, it creates a constituency who would be out of a job (or at least as good a paying job) absent the distortions.

        It’s pretty sad to see even Europe now becoming less of a totalitarian backwater than we are, in more and more areas.

      • 0 avatar
        Advance_92

        Just considering you can get a Focus with something like seven different engines in Europe I’d say we are quite restricted. Reasons for this have been the subject of articles here before.

    • 0 avatar
      bumpy ii

      Tried to buy a turbodiesel Hilux recently?


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