EC officials have snubbed food supermarket giants such as Tesco and cut-price online car specialists which wanted new cars direct from manufacturers.

Revised Block Exemption, in force from October 1, is likely to insist that two forms of dealers should supply new entrants.

Franchised dealers will supply vehicles to a new breed of independent resellers (called 'grey dealers' by the EC) who could supply retailers wanting to move into car sales.

The new set-up will also allow franchised dealers to supply direct. In this way, the EC seems to have found a way of opening up the market while accepting the industry argument that the franchising structure should continue.

Carmakers believe the EC is giving too much power to dealers. Acea, the European manufacturers' organisation, this week attacked the proposals as “inappropriate and too far-reaching”.

Detailed proposals drafted by the European competition committee are expected to be received by the EC's powerful advisory committee on February 5.

Then the draft will be studied by other EC departments which means there could be further changes.

David Evans, Retail Motor Industry Federation chief executive, said: “Dealers should be reasonably pleased if the current draft does become law. The EC has recognised that the franchised dealer system operating for about a century has not been discredited.

“The EC appears to have recognised that it operates in the interests of consumers. It is likely to continue, with changes which reflect a changed market place.

“The best parts of the current regulation – manufacturers selecting dealers to operate exclusively in areas – will remain in place. But improvements in the relationship between manufacturers and dealers mean consumers will be better served.”

The new Block Exemption regulation should increase competition. It will be in place until 2010 when the EC is likely to stop suppliers and retailers in all industries from imposing conditions.

A more fluid supply line opens opportunities for the AA and other organisations with large customer bases to enter motor retailing.

The creation of 'independent resellers' opens up many possibilities. They could become an acceptable way for manufacturers to supply new entrants.

Virgin Cars is positioning itself to take advantage of the freer market by deciding to open a dealership in the South-east by the summer. It is likely to choose a site large enough to display several makes of cars – the EC wants to encourage multi-franchising.