The OFT wants to see independent garages winning a far greater share of the one-to-three-year-old vehicle servicing market, and is preparing a nationwide advertising campaign to persuade motorists to seek an alternative to their franchised dealer.
“Recent changes to European regulation for the car sector mean that manufacturers and their franchised dealers are obliged to open themselves up to greater competition for aftersales services from garages outside their network,” says an OFT spokesman.
“For this to work, customers must have undistorted choice about where they have this work undertaken. Car owners are paying more than £500m more than they need by going to dealers. We want motorists to be able to choose where to take their vehicles.”
Fine words – and looking at some of the labour and parts rates currently charged by dealers, few would disagree that a feasible independent alternative to franchised networks would be in the interest of the consumer. But no-one seems to have established exactly how such a system will work.
Despite the changes brought about by block exemption, there's scant evidence that lots of independent garages are being accepted into carmakers' approved networks. There are some ex-franchised dealers that have lost the right to sell new cars gaining repairer status for that franchise, while Citroen and Mazda are happy to accept independents into their expanding networks, but hopes that repairers across the country would soon be servicing BMWs or Audis – or cars from several marques – under warranty have been dashed.
“We are calling on carmakers to lift restrictions on where new cars can be serviced,” says the OFT spokesman. “Manufacturers offer a warranty of one to three years on new cars, to cover any problems or defects that might occur. Many offer 'dealer-based' extended warranties, under the terms of which the car must be serviced by a garage belonging to the manufacturer's dealer network. “Aftersales service generally amounts to about 40% of the lifetime cost of a car and in the UK, motorists spend around £10bn a year on maintenance and repair. About £1.4bn of that is spent on looking after cars under than three years old, and franchised dealers receive about 90% of that business.
“We want servicing restrictions such as these to be removed. If the car manufacturing industry fails to do so, we will consider launching a formal investigation under European competition law.”
Alan Pulham, director of the RMI's franchised dealer division, believes main servicing work under warranty will continue to be carried out at franchised dealerships. “Some independents may be able to do minor services, involving fluid changes or replacing worn parts, but the full-blown work involving anything that might threaten the warranty will still be undertaken by franchised dealers,” he says. “They have the technology and information to service new cars. Approved and non-approved garages should be able to access this information as well, but no-one has explained how this might work.”
Critics of the campaign say independents would have to buy expensive diagnostic equipment if they wished to service and repair new cars – and their charges would rise dramatically, although this hasn't been the experience of Citroen approved repairer Citrotech (AM, January 16).
Only 3% of independent garages have applied to carmakers to become approved repairers, according to a recent survey by AIRO, the Authorised Independent Repairers Organisation. “Standards are too high, with manufacturers concentrating on corporate image and identity rather than new equipment. Independents want to remain independent and service multiple brands, rather than looking like a franchised garage,” says AIRO's Mark Taylor-Jones.
Brendan O'Malley, vice-president international, Snap-On Diagnostics, agrees: “The vision of the new block exemption regulations, encouraging workshops to service vehicles from several brands, is very unlikely to happen. No-one could afford the premises.”
The OFT says there is widespread confusion about the terms attached to warranties, with most consumers believing they must have cars serviced at a dealer for the warranty to remain valid, when this is not necessarily the case. It believes manufacturers and dealers should improve their advice to consumers on the options for servicing new and nearly-new cars and will be issuing guidance.
No-one doubts the OFT's determination to liberate the trade. Indeed, with effect from May, it will gain responsibility for the enforcement of European competition legislation in the UK. At the heart of the problem is the fact carmakers make more money selling parts than they do selling cars – and the key to those profits has been franchised networks' grip on the vehicle servicing and repair market.
To defend that market, they have an imposing argument based on safety and quality. Their argument – that the modern motor car is an extremely complex machine that requires high skills levels, high quality replacement parts, and major investment in technical back-up to keep it on the road – is one that will last well beyond the OFT's advertisement campaign this spring.
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