Euro fails to influence prices - EU report

Questions and answers about the car markets across Europe

What's 'block exemption' about?

It allows the car industry to restrict distribution of their products, with dealers tied to manufacturers and closed sales and repair networks. In any other industry this would be seen as anti-competitive and against the principles of the free market. The current exemption runs out in September.

Under the new rules dealers will be allowed to sell cars anywhere within the EU, and manufacturers will no longer be able to stop authorised mechanics who meet the company's criteria from offering after-sales services. The aim is to give dealers and repair businesses more freedom to set their own prices than is now the case.

So there'll be a lot more dealers in Ireland selling each marque?

Not quite. From October onwards, car makers must choose whether they want a selective or exclusive dealer network. Under the selective scheme car makers set a quantitative limit on the number of dealers in a particular area, generally accepted to be the national boundaries. The exclusive option limits dealers to one marque- who will then be able to sell to resellers.

What does it mean for Irish dealers?

Not as much as you might think. According to Cyril McHugh of the Society of the Irish Motor Industry (SIMI) virtually all car makers will choose the selective option, in order to prevent the supermarkets getting in on the game.

Most Irish dealers have experience in multi-franchising. They also have experience in foreign markets with a steady trade to Britain over the years.

So, for example, under the selective option Opel can decide how many dealers they will have in Ireland?

Exactly, and until 2005 car makers can also "indicate" the locations of these dealers, keeping them spread across the State and not all locating in Dublin, for example.

And after that?

Pretty much the same. They'll "indicate" the location of the dealership in the area. However, from 2005 these dealers can then open a second dealership anywhere else in the EU. The only comeback will be if car makers can argue that the dealer does not meet with the qualitative standards they set down. So the EU has finally taken on one of the last great anti-competitive markets?

Get real. The block exemption has merely been adjusted and car makers can still pick and choose their dealers under the selective model.

The Commission has twice tried to loosen car makers" grip on the dealership system, but loopholes have rendered the attempts fruitless.

So will it mean cheaper cars for the rest of us?

Not a chance of it. Car makers have been selling the cars wholesale at a discount here compared to the average in other EU states because we pay high taxes on cars.

Ahh, so this will force the Government to reduce tax when people complain about the high price of cars?

It must be great to live in your world, where governments change tax policies at the behest of the public. Car makers have a point when they argue that the biggest price distortion is tax.

With tax harmonisation in the EU still a pipedream for Europhiles (and a nightmare for Eurosceptics), a major hurdle to price standardisation remains.

Will we be buying BMWs along with the bread and milk at the supermarket?

Supermarkets are unlikely to become major sellers of cars, not least because shops will be able only to resell vehicles bought from dealers, so consumers should expect a mark-up.

Car makers would rather close than see their products next to the Spam, and experts argue that cars are an unattractive product for supermarkets as a good deal of the profit comes from after-sales service and financing.