Changes to the way new cars are sold and serviced that came into force on October 1 are unlikely to herald the revolution that consumer groups want.
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European legislation that governs the relationship between car manufacturers and dealers – the so-called Block Exemption – has been overhauled.
Traditional dealer territories are abandoned and, in theory, many more independent garages should be able to apply for and be granted approved service centre recognition for the major brands.
Also, in theory at least, a dealer in Bournemouth in the UK could advertise and sell cars in Boston, Blackpool, Bristol or even Berlin in Germany and Bilbao in Spain, while dealers in Lille or Lyon in France could operate across the channel in London or Leicester.
That’s unlikely to happen, certainly for several years, because of the impracticalities of covering such a vast area.
“This is something we will see develop over many years,” says car industry expert Professor Garel Rhys of the Cardiff Business School.
And the UK is also unlikely to see hundreds of independent, but approved, service centres open across the country because the cost of meeting any manufacturer’s standards would be prohibitive to many smaller garages.
In fact, servicing costs could rise, says Rhys. “Instead of being presented with greater choice, consumers may have to pay more at some independent garages because they have to pass on the cost of investment in new equipment.”
There are three elements to the dealer agreement. One covers new vehicle sale; the second service and repair and the third covers spare parts.
“A dealer can ‘apply’ to take on one or more of these elements, but a dealer who has a new vehicle sales agreement is not obliged to take on servicing and repair activities,” says Professor Martin Clarke of GMAP Consulting.
“Similarly a dealer can apply to be a service and repairer with no other contractual conditions. Manufacturers cannot penalise dealers who do not take on a service and repair contract through restricting the supply of new vehicles or other punitive measures.”
One of the major drivers behind the Block Exemption changes was the belief that it would lead to far more multi-franchise outlets.
That, says Clarke, is unlikely to happen. “Manufacturers will be very reluctant to encourage anything that dilutes the equity they have created in their brands.
“Although multi-franchising is allowed, our research suggests that many dealers will not want to fall out of favour with manufacturers.”
That’s because much of the goodwill in a dealer’s business is contained in the franchise agreement which can be sold on to a buyer.
But what might happen, says Clarke, is the arrival of new entrants like banks and supermarkets.
“What we believe is a potentially attractive strategy for a new entrant is to open a relatively small national network of multi-franchised sales points backed up by a more extensive network of service and repair outlets.”
Other research points to customers being prepared to drive up to an hour to buy a car, but nor more than 20 minutes to have it serviced. So the UK is also likely to see far more “hub and spoke” set-ups with a main dealer, centrally located, operating a number of satellite service and repair centres.
