The North American Automobile Trade Association has wasted no time linking yesterday’s announcement of relaxed competition-exemption rules governing European car sales to its own developing cross-border dispute.


A major row is developing between US car dealers and manufacturers who are trying to stop them buying cheaper cars in Canada for sale in the US. US dealers in border states are increasingly forced to do this to compete with independent dealers importing new Canadian vehicles and have been threatened with the withdrawal of warranties on Candian-sourced cars and, in Ford’s case, cut allocations of the Thunderbird.


“Consumers in Britain typically have to pay thousands of dollars more for identical cars compared to people on the continent. These pricing policies also exist in North America, where Americans are forced to pay thousands more for the same car than Canadians,”the NAATA says.


“Car makers try to stop people from buying cars in the market that gives
them the best deal. In North America, car buyers in Canada are often required
to sign agreements that prohibit them from exporting vehicles to the United
States.


“Manufacturers also penalise their Canadian dealers when they sell cars
that end up in the United States. The European Commission has decided that
this kind of behaviour is anti-competitive and has imposed significant fines on
offending car makers. In October 2001, DaimlerChrysler was fined 71.825
million euros (approx. $63 million U.S.) for prohibiting their dealers from
selling outside specified territories. Volkswagen was previously hit with a
bigger fine.”


Brian Osler, NAATA president, argues that market allocation policies hurt the consumer.


“When car manufacturers are allowed to stop vehicles from crossing borders simply to restrict supply or inflate prices, the consumer loses. Independent dealers and the public should be allowed to buy vehicles for export. It increases
competition and provides consumer alternatives. It’s healthy for the market.”


New rules for Europe announced yesterday will come into effect on October 1, 2002. For the first time, new vehicle dealers will be allowed to sell more than one brand and manufacturers will be prohibited from reducing allocation and imposing financial penalties on dealers who sell across international borders. Manufacturers will also have to provide independent vehicle repairers access to parts, technical information and training.


“This is a key development for fairness in the market”, Osler said.


“Manufacturers don’t want to lose their ability to keep prices artificially
high in the United States. Car makers on this side of the ocean should take
note of what is happening over in Europe. If they continue to hit Americans
with higher prices and try to keep Canadian cars out of the market, they will
face repercussions here too.”


The NAATA says that car manufacturers often claim that export restrictions are needed to subsidise the Canadian market and protect franchisees.


“This is a huge myth perpetrated by manufacturers”, says Osler.


“Vehicle manufacturers are sophisticated companies run by people who are too smart to sell products at a loss. The Canadian market is not subsidised and manufacturers do not lose money selling in Canada. Otherwise they wouldn’t fight so hard for market share. The bottom line is that Canadians are willing to pay less for cars.


“It’s not fair to ban Americans from access to Canadian dealers and freedom of
choice.”