New rules aimed at opening up how new cars are sold in Europe are so far buried under piles of paperwork.
In the transition year before the European Commission's new block exemption regulations take effect October 1, manufacturers and dealers are lost in the details, a panel of industry executives said at the Automotive News Europe Congress in Paris.
The new block exemption aims to give new-car customers greater choice and a more satisfying purchasing experience. By separating the sales, service and parts businesses in dealerships. The new rules have created opportunities for new entrants and new business models in both the retail and service businesses. But panelists also noted the extensive work it has created for lawyers and consultants.
The transition period since October 1, 2002 has been referred to as a "year of grace" as dealers and automakers rush to get new contracts in place.
But it doesn't feel like that, said Jonathan Browning, vice president of sales, marketing and aftersales for General Motors Europe.
"It has felt like a year of frantic activity," he said. "Between now and October, there will be 1.4 million pages of legal documentation that has to be developed and signed off dealer by dealer."
Many forecasters have said the new rules will simply help big dealer groups grow bigger. The UK has more large retail groups than any other European country.
Andy Eggleston, president of Polk Europe, said the UK model is likely to become more prevalent in Europe. Eggleston said big retailers are increasingly doing jobs manufacturers once did.
"Dealer groups are increasingly putting together infrastructure that was once supplied by manufacturers," he said. "They'll have their own CRM [customer relationship management] databases, their own marketing, their own call centers."
Some dealer websites don't even refer to manufacturers, he said.
Block exemption allows multiple brands to be sold from the same showroom. One UK dealership already selling multiple brands under one roof is Virgin Cars, which sells 25 brands at a new store at Salford Quays in Manchester, England.
Virgin Cars CEO Ian Lancaster said Virgin hopes to sell between 2,500 and 3,000 vehicles a year at the 2,000-square-meter showroom.
"Customers are telling us it's like a motor show," he said. "Customers are telling us this should have happened years ago."
But the presence of big stores such as the Virgin car supermarket will put more pressure on manufacturers to strengthen their brands, said Peter Stephenson-Wright, managing director for automotive of Wunderman Europe, a unit of the Young and Rubicam ad agency.
"The [pre-block exemption] rule change scenario made it particularly easy to be locked into a relationship with the consumer," he said, "and to rely on the dealer relationship to carry that through and tie-in with parts and service to carry that on. That is slowly being taken apart. Building a relationship early on will become more important."
So manufacturers must establish an affinity with a customer at the very beginning of the purchasing process, he said.
Despite the changes and the predicted trend toward big dealers, manufacturers are eager to retain as many customer contact points as possible in the new retail landscape. And they know who has been traditionally best at defending the brand at the local level.
"Mom-and-pop dealers are very strong," said Stefan Jacoby, president and CEO of Mitsubishi Motors Europe. "They have very strong loyalty and we want to keep them."
The European Commission changed the rules to favor customers. The panelists agreed on one thing: It will be a long time before the implications of those changes will be fully understood and absorbed.