On the face of it, independent repairers could benefit considerably from the changes to block exemption. Those who gain authorised repairer status from an OEM will be able to compete for servicing business from that manufacturer and buy parts from sources other than the OEMs. Like changes to the sales agreements, it’s all designed to loosen the OEMs grip on the dealer network and free up competition.
So will independent repairers be forming an orderly queue to grab the business? No, thinks RMI franchised dealer director Alan Pulham. “It will have little appeal for multi-site independents such as the fast fits,” he reckons. “They have their cost base sorted out, working on simple tasks that need unscheduled replacements – tyres, exhausts, brakes, batteries.” Pulham thinks that the associated costs of gaining authorised repairer status just won’t appeal.
He gets some sympathy for this view from his opposite number at the RMI, Ray Holloway, director of the independent garage and fuels division. “Since the most profitable work for independents is for older cars, there’s no guarantee that this will follow,” he says. “There’s no crock of gold in having to deal with manufacturers.” But Holloway’s concerns are currently with other issues. “Block exemption does not deal with the issue of who should carry out servicing in the warranty period,” he says, “We have requested clarity on the position, as it is currently open to interpretation.”
As Holloway points out, under the current rules, where an independent garage is equipped to dealer standard and has carried out the relevant technician training programmes, a manufacturer may be happy for the business to carry out servicing on its cars. But this depends on the terms of the warranty. This situation could continue under the new system if the complete warranty is provided by the manufacturer. But if, for instance, a three-year warranty is made up of a one-year manufacturer warranty plus mechanical insurance policy for the succeeding years, it could run into trouble.
Extended warranties are often mechanical insurance policies too and the problem arises if the insurers will not cover work carried out by an independent, thereby invalidating the warranty. How will an independent without authorised repairer status be treated under this system? The question is one that the RMI has referred to the Office of Fair Trading. “It is one of the most fundamental issues to be answered,” says Holloway, “An OFT statement should resolve this. We have asked for clarification well before October.”
If the OFT does not resolve the matter, then the RMI will refer it back to DG IV, the EU competition commission in Brussels. Holloway believes it is not an issue that carries as much importance in other European markets, because sales and servicing have been separated in many member states already, so it is more relevant here in UK. “It’s a flaw in the whole process that it is open to national interpretation,” he says.
One area that Holloway believes will change as the new system matures is the access that independents will gain to data on electronic systems. US car buyers have had a gift of access to this information under the Freedom of Information act for some time and there are provisions for it under the new block exemption rules. If independent repairers had access to this information, it could have a significant impact. As Holloway says: “Inevitably, not all will change on 1 October; we expect we will still be seeking interpretation in years one and two.”
Alan Pulham believes that authorised repairer status is much more attractive to those already in the franchised sector. “It’s early days but the impression is that we will see more franchised dealers taking advantage of the opportunities because of the cost.”
He identifies three categories of dealer who will be attracted to the system: the recently disenfranchised dealer, those with an eye on local opportunities and dealers already operating different franchises on different sites. “Take a dealer who sells Citroen in Reading and Peugeot in Swindon, for instance,” says Pulham. “This could present an opportunity to cross-fertilise and take on approved repairer status for Citroen in Swindon and Peugeot in Reading.” It would be a logical extension to the business where the contacts and skills already exist.
By dealers with an eye on local opportunities, Pulham is thinking of those who have seen their franchised sales fall in recent years. He gave the example of a Rover dealer who will have seen market share fall significantly over the past ten years, now occupying a relatively large site that is not fully utilised. With an equipped workshop and trained technicians, it might be attractive to divide the workshop and take on work from another manufacturer as an approved repairer.
The fallout from network re-organisation could easily push other likely candidates forward. Dealers who lose their franchise in the run-up to the new system’s implementation will have the equipment and expertise needed to become an authorised repairer and may decide to pursue that option.
At the same time, Pulham identifies this as a threat to the incoming business, which has been offered the franchised dealership and service point. “If the outgoing dealer has the equipment and expertise to do the job and chooses to set up against you, you will have to run fast to catch up,” he says.
There will be growing opportunities in contract servicing, Pulham believes, because of the way servicing business has developed. “Servicing is now a distress purchase,” he says. “When it used to be four times a year, owners scheduled this into their diaries, but now it’s at 20,000 miles or more, it’s not scheduled, so is seen as more of a problem when it comes around.”
Even though many company car drivers have opted out of company car schemes, they still want the security of a maintenance package to cater for their needs. “There is a potential opportunity here for franchised dealers,” says Pulham. “Manufacturers will like it because it will keep control of business in their hands. The determining factor will be if the dealers can afford to do it.”