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.