The European Commission’s new plans for the distribution and sale of cars in the EU will loosen the ties between manufacturers and dealers allowing greater competition and lower prices for consumers, writes Alan Osborn.

The new rules, which cannot be blocked by member governments or the European Parliament because the Commission has sole responsibility for competition policy, will come into force in October after a consultation process with the industry.

Under the plans, dealers will be allowed to sell anywhere, rather than being restricted to a specific geographical area, they will be freed from after-sales obligations and the sale of spare parts and will be able to sell different makes of car under the same roof.

However potential new retail outlets, such as supermarkets and Internet dealers, will not initially be able to buy vehicles directly from manufacturers so limiting their scope for price-cutting.

The plans, drawn up to replace the existing block exemption system which ties dealers closely to manufacturers, fall short of a total liberalisation of the market, as many had been expecting, though they have been welcomed by consumers groups as well as motor dealers.

Among other things the new scheme will allow foreign dealers to set up in other EU countries thus making it possible for British consumers to buy at continental prices without having to cross the Channel. This will put an end to the disparity in new car prices, which has meant the same car could cost a third less in some EU countries than in the UK.

The Commission said the new scheme ended the present restrictive
arrangements but would not bring about a “free-for-all” in the market. It was an attempt to introduce flexibility while recognising that the selling of cars had “special characteristics.”

German president Gerhard Schroder said Germany would oppose the new scheme because it would bring “huge competitive disadvantages to the German car industry.”