View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. News
June 16, 2003

UK: Car makers deter service applicants under new Block Exemption regulations

Car maker delays in writing new dealer contracts under the block exemption are creating barriers to new entrants in the service business, a prominent dealer lobbyist charged, according to Automotive News Europe.

By bcusack

Car maker delays in writing new dealer contracts under the block exemption are creating barriers to new entrants in the service business, a prominent dealer lobbyist charged, according to Automotive News Europe.

“The people who are interested in making applications will not be able to do so until the manufacturers disclose what their standards will be,” said David Evans, chairman of the task force for CECRA, the European dealer association.

Evans said: “Some of our franchised dealers want to be repairers for other makes. They want to know exactly what would be involved for them to exercise their option. Here we are in June and they do not know. It is very unsatisfactory.”

Evans said CECRA will complain about the issue in a document it will submit to the European Commission. Traditionally, dealers have had a single contract with the manufacturers. The new rule splits the contract into three: sales, service and parts. The new block exemption regulation takes effect on October 1. “The clock is ticking,” said Evans. He predicted there will be few if any service-only franchises working by that time.

The car companies say they were initially flooded with applications for service-only workshops. “We received about 240 applications for workshops only,” said Dieter Laxy, managing director of Volvo Deutschland. “The standards we require are the same as we require from [new car] dealers.” Once applicants realised this, many withdrew, and the number of applicants quickly fell below 100. “Once we started discussions with individual applicants, we’re now at only 18,” said Laxy.

Roelant de Waard, vice president of the Ford of Europe customer service division in Cologne, said many applicants are gathering information on what their competitors’ standards are. Once they learn those standards, they withdraw.

Ford received nearly 400 applications for service-only contracts, but that list is down to fewer than 100 as Ford goes on to the next stage of auditing applicants. “This is a gathering of information. The level of standards has impact on kind of network you’ll end up with,” said de Waard.

Peter Stevenson, senior manager for Urban Science, a consultancy that serves the motor industry, said dealer standards are complex, especially under the new rules.

“If you’re lucky, you get 20-30 pages of just talk that references another 15 documents,” he said. “It’s a huge undertaking to go through somebody’s standards.”

Many applicants who are really interested in a workshop contract find the investment requirement quite costly. Said Stevenson: “It really is going to be the entrepreneurs who go for this. The investment is big, and the risk is high. When they fully understand how much the investment is going to cost them, they back off.”

Laxy said Volvo got some inquiries from former Volvo dealers and some from independent repairers.

Stevenson said some dealers of developing brands — Skoda for example — have put money into repair bays but haven’t used all their capacity yet. Those dealers might be able to take on another brand for repairs only.

De Waard said the block exemption is still a work in progress. “The EU has phrased a vision but they have not specifically defined what they want to see in the contracts. All manufacturers are defining what they think is right, and over time we’ll find out if this is seen as meeting the vision as described in the law.”

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Monday. The industry's most comprehensive news and information delivered every quarter.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Auto