ECONOMY

Car prices are set to soar under new European Commission regulations

Will cars be cheaper in Greece as a result of the European Commission’s latest proposals relating to the car market? No, on the contrary they will be more expensive. How about servicing and spare parts? Maybe but not more than 1-2 percent cheaper. Supermarkets selling cars, cars via the Internet? Very unlikely. These are the views of Andreas Andrikopoulos, president of the Association of Motor Vehicle Importers-Representatives (SEAA). In an interview with Kathimerini, he says the commission’s plans can change but not overturn the car block exemption. He says the proposals will result in few modifications as Brussels recognizes the usefulness of the block exemption. This is the principal reason why it has decided to perpetuate the old regime in a modified form rather than abolish it. «The present sales system came about in response to the consumer’s needs, namely that selling an industrial product such as a car needs knowledge and specialization,» the SEAA head points out. He says the present dealer network system exists in one form or other all over the world, protected by legislation in some areas but not in others. «In Europe, this system has been in operation since 1930, that is 50 years before legislation was enacted in 1985, reinforcing the regime. The car industry was exempted from competition rules in line with Regulation 123/85 and the exemption was renewed 10 years later with Regulation 1475/95, which is due to expire in October,» Andrikopoulos said. The EU’s objective is to level out car factory prices in all the 15 European Union countries. This prospect leaves SEAA with some concern as car factory prices before taxes in Greece are among the lowest in the region. According to a commission study of car prices in the region, small cars in Greece are sold at prices that easily compete with those offered in any other EU country. The prices of cars before taxes in the EU vary enormously and can differ by as much as 40-50 percent due to a number of factors such as geography, local markets, manufacturing differences, and taxes. On the subject of supermarkets selling cars and dealers selling different car brands, Andrikopoulos says the new regulations «permit us to refuse our cars to be distributed via supermarkets and also gives us the right to set rules as to who can sell our cars.» He says supermarkets and Internet-based dealers can be exempted, especially if they can convince car manufacturers to allow them to distribute their cars, resulting in a temporary fall in car prices. In the long run, however, this can be counterproductive as it would reduce the number of cars recommended to consumers while also creating supershops characterized by short-term price cuts but higher prices in the long term. The commission’s proposals allow dealers to sell more than one make of car on condition that the cars are displayed in different areas in the showroom. Manufacturers, in turn, can obligate dealers to offer the entire range of products and not just the more popular ones in their showrooms. Andrikopoulos said the other extreme would be the gradual disappearance of models such as SUV, MPV, roadsters and other makes. He says a car dealer perforce needs a showroom of 1,500-2,000 square meters (for a make with a modest market share) and the corresponding amount in capital and personnel. These requirements therefore make it nearly impossible for a dealer to offer more than two or three makes of car. The commission’s proposals do not compel manufacturers to provide their cars to Internet-based dealers. What these dealers can do, however, is offer low prices, without the burden of a showroom and employees. Brussels also seeks to abolish the obligation for dealers to provide repair services. Manufacturers nevertheless can set conditions for authorizing dealers to provide this service. SEAA’s Andrikopoulos noted that as «car repairs are such a profitable business, there will not be one dealer who will refuse to offer a service that can supplement their income.» He stresses the problem for big cars, especially prices after taxes are included. «In the medium term, that is two to four years, car factory prices will converge. Unfortunately for Greece, this means price hikes. My feeling is that the costs of buying a car and using one will go up substantially,» the SEAA head says, pointing to rising fuel prices, increased insurance costs and higher road taxes.