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Company car feature: Block Exemption ruling and what it means for the fleet operator

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Tusker Direct logoIn this short piece contributed by lease hire experts Tusker, Helen Owen looks at what the recent changes to the Block Exemption ruling mean for the Fleet Operator.



From October 2003, the years’ grace granted to manufacturers ends and the full impact of the EU decision to lift the Block Exemption will take effect.

The Block Exemption ruling has so far meant that manufacturers have kept a tight control on both vehicle distribution routes and the delivery of maintenance services. The lifting of this law is aimed to promote a greater flexibility of distribution for the retail trade, resulting in greater choice and range of options for the end consumer.

In practical terms the fleet operator can expect changes to the way cars are retailed, increased price harmonisation across the EU and a restructuring of both the dealership and maintenance outlets across the UK. However the changes will be evolutionary rather than revolutionary as the various players experiment with the numerous options now available to them.

On the retail side we can expect to see major changes to the ‘shopping’ experience, as retail outlets can now experiment with multi-franchising. A driver may be able to view five distinct brands of car in the same segment at a single dealership rather than having to go to five different outlets. However many manufacturers and indeed dealerships may resist this option, regarding it as dilutive and ultimately damaging to their brand and therefore not in the best interests of the consumer.

In terms of price, we will eventually see more price synchronization and increased competition – good news for most consumers. However, one commonly voiced concern is that these rules will play to the strength of the larger dealership groups who will be able to use their purchasing leverage to greater effect, resulting in a reduction in smaller (and more rural) dealerships.

Perhaps most the interesting change for the Fleet Operator is the impact on the vehicle maintenance supplier. Under the new rulings, independent operators will receive a big boost. Although manufacturers will still be in a position to appoint ‘approved repairers’, they will also be under obligation to provide all relevant information and technical data to any servicing outlet or garage that requests it. These garages will also be able to receive matching quality parts direct from the production line as replacements for OEM products. As a result the maintenance industry is set to become much more competitive and we will undoubtedly see significant growth in non-franchised specialist service and maintenance outlets that can take advantage of lower cost locations and cheaper labour rates.

For the majority of fleet operators the changes will be positive. To professional purchasers the changes to the ‘shopping experience’ will be less relevant, as the manufacturers and leasing companies already ensure that their customers receive special attention in this area. Fleet Operators will probably experience some price deflation as purchasing economies begin to take effect and are passed on. But by far the biggest change will take place in the service and maintenance arena. Non-franchised servicing, already strong in the UK, is set to become even stronger. Prices will fall further, service levels will rise and the number of options available to the fleet operator will increase. This has to be good news. However all of this will take time, the full impact will play out over the next five years, not five months.

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