Soon, Anything Goes At Europe's Car Dealers

Bertel Schmitt
by Bertel Schmitt
soon anything goes at europe s car dealers

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.

Join the conversation
9 of 19 comments
  • TheEuropean TheEuropean on Jul 13, 2011

    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 ;)

    • SPPPP SPPPP on Jul 14, 2011

      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.

  • Rpol35 Rpol35 on Jul 13, 2011

    "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?

    • See 5 previous
    • Bryce Bryce on Jul 14, 2011

      @bumpy ii No but there is a yard full of em down the road Detroit is still hiding behind a tariff wall

  • Denis Jeep have other cars?!?
  • Darren Mertz In 2000, after reading the glowing reviews from c/d in 1998, I decided that was the car for me (yep, it took me 2 years to make up my mind). I found a 1999 with 24k on the clock at a local Volvo dealership. I think the salesman was more impressed with it than I was. It was everything I had hoped for. Comfortable, stylish, roomy, refined, efficient, flexible, ... I can't think of more superlatives right now but there are likely more. I had that car until just last year at this time. A red light runner t-boned me and my partner who was in the passenger seat. The cops estimate the other driver hit us at about 50 mph - on a city street. My partner wasn't visibly injured (when the seat air bag went off it shoved him out of the way of the intruding car) but his hip was rather tweaked. My car, though, was gone. I cried like a baby when they towed it away. I ruminated for months trying to decide how to replace it. Luckily, we had my 1998 SAAB 9000 as a spare car to use. I decided early on that there would be no new car considered. I loathe touch screens. I'm also not a fan of climate control. Months went by. I decided to keep looking for another B5 Passat. As the author wrote, the B5.5 just looked 'over done'. October this past year I found my Cinderella slipper - an early 2001. Same silver color. Same black leather interior. Same 1.8T engine. Same 5 speed manual transmission. I was happier than a pig in sh!t. But a little sad also. I had replaced my baby. But life goes on. I drive it every day to work which takes me over some rather twisty freeway ramps. I love the light snarel as I charge up some steep hills on my way home. So, I'm a dyed-in-the-wool Passat guy.
  • Paul Mezhir As awful as the styling was on these cars, they were beautifully assembled and extremely well finished for the day. The doors closed solidly, the ride was extremely quiet and the absence of squeaks and rattles was commendable. As for styling? Everything's beautiful in it's own way.....except for the VI's proportions were just odd: the passenger compartment and wheelbase seemed to be way too short, especially compared to the VI sedan. Even the short-lived Town Coupe had much better proportions. None of the fox-body Lincolns could compare to the beautiful proportions of the Mark was the epitome of long, low, sleek and elegant. The proportions were just about perfect from every angle.
  • ToolGuy Silhouetting yourself on a ridge like that is an excellent way to get yourself shot ( Skylining)."Don't you know there's a special military operation on?"
  • ToolGuy When Farley says “like the Millennium Falcon” he means "fully updatable" and "constantly improving" -- it's right there in the Car and Driver article (and makes perfect sense).