Manufacturers are being warned the cost burden they are placing on their franchisees threatens to cripple the industry.

The warning comes from the Retail Motor Industry Federation.

"If we are to retain a viable and healthy retail motor sector, vehicle manufacturers must look objectively at the costs they impose on car dealers," says Alan Pulham, franchised dealer director for the Retail Motor Industry Federation (RMI), speaking at today's AM Industry Conference in Oxford.

Pulham was commenting on the trend towards rising dealer costs resulting from increased manufacturer requirements.

He continues: "The sector is at a financial crossroads. The price of vehicles is dropping in real terms, as are dealer margins on new car sales and servicing, whilst property and labour costs are rising. At the same time manufacturers are demanding more and more investment in corporate identity, decor, technology, and equipment.

"Unless costs are reduced we will see a faster decline in dealer numbers. This will not only be bad for the dealers themselves, but it will reduce choice for consumers, and in the long term affect manufacturers as well."

Pulham adds: "Dealers and manufacturers must work together to reduce costs and redevelop the mutually profitable partnership that has made the retail motor sector so successful."