Used schemes are `outside EU rules'
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III Manufacturers which compel dealers to sign up to approved used truck schemes against their will are contravening European Union competition regulations, warns Mike Mudie, chairman of the Retail Motor Industry
Federation's National Truck Council.
"Any scheme that relates to used vehicles which is linked to a franchise goes against the Block Exemption rules," he says. "The manufacturers are putting the continuance of Block Exemption at risk."
Block Exemption is a 14-year-old concession which permits car, van, and truck makers to avoid EU competition laws by selling new vehicles solely through their
own dealerships. Mudie argues that it does not cover used products.
Compulsion would be difficult to prove, Mudie says, because the manufacturers are careful not to put their demands down on paper. "What happens is that the carrots on the end of the string— dealer bonuses—can get pulled away. And too much of a dealer's potential margin depends on bonuses."
Mudie is appalled by the way in which this problem has been allowed to build up, and places the blame on the manufacturers: "They have caused it by their reckless writing of high residuals, and it is lamentable that dealers have to share their pain."
However, he believes they've learnt their lesson. "All the estab
lished players have caught colds, and they don't want that to happen again," he says.
He doubts anybody will go back to a short-term contracts/high residuals policy, and suggests the industry is moving towards lower volumes, but better margins.
He also believes that approved used truck schemes can work. "But only if dealers are offered stock at the right sort of money, and are not compelled to take it," says Mudie. "And they won't be making io to 15% margins on it."
There's no indication that attempts are being made by truck makers and dealers to fix prices at an artificially high level, says Mudie. "For a truck manufacturer to suggest that its dealers actually earned some money out of new vehicle sales would in fact be quite refreshing," Mudie says. Mudie wants to see Block Exemption retained, but with truck makers having less power over dealers.
He warns that its loss could result in a free-for-all in which franchised outlets would be reluctant to invest in training, workshops, and parts stocks because they would no longer have exclusive territories.