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After the EuroCar Seminar on 20 January 2010, we posted the top ten questions asked by OEM and OES delegates in attendance. Today I will be answering the last few questions. I hope you have found all of our answers helpful. If you missed the answers to the previous questions, don’t forget to read the answers posted by Norm Marks regarding marketing and Thomas Mawick regarding hybrids.

Can you share with us where or from whom dealer network planning can be most improved?

All manufacturers in all countries have room for improvement... I believe that in Europe, German networks need restructuring most urgently. Surprisingly, importers suffer most; even if they had better possibilities to align locations strategically, they need to improve dealer performance and network efficiency. The focus of network planning should be on the key metro markets.

Besides the saturated markets, there will be a lot of network planning potential in the eastern European countries, especially Russia.

Do you have a view about the demise of block exemption and the impact this will have?

Motor Vehicle Block Exemption Regulation ("BER") is the legislative framework for motor vehicle distribution and servicing agreements in the EU. In place since 2002, current regulation No. 1400/2002 was meant to pave the way for efficient competition within the European markets and caused some significant changes in dealer networks such as discontinuation of location clause or multi-franchising trends.

With the current regulation expiring in a couple of months, the question is valid whether we have to expect further significant changes. The European Commission has not yet approved any new regulation so it's hard to say what the impact will be in detail. But from the recent drafts seen, here are a couple of issues:
  • New BER is anticipated in June for service but for sales there will be a transition time until 2013. In my opinion, we must not separate regulations for new vehicle sales and aftersales business. I have outlined how important integrated sales and service functions are for both dealers and manufacturers – Vertical BER does not help this way.
  • Vertical BER allows brand exclusivity contracts for up to a 5 year contract period, while automotive BER does not. Multi-brand dealerships are on average underperforming, therefore I have no doubt that manufacturers will make use of this exclusivity option. For many multi-franchise businesses this could mean that recent investments will not pay for themselves.
  • And finally a legal issue: the principle of legal certainty is not given for those manufacturers and/or dealers which exceed 30% market share.
Is the decrease in the Japanese dealer network an indication of the direction European dealer networks are going?

Indeed we could see some dealer terminations recently and domestic manufacturers already cut their networks in Japan or plan to do so. But it is not quite the same downsizing trend as in Europe or North America; dealer networks in Japan are relatively stable. The reason why we might see a decline in dealer contracts is different from Europe and the US. There are two market characteristics which make Japanese networks unique: first, Japan has a broader range of models in the market and second, dealerships and showrooms are commonly very small. As a result, many manufacturers sell different models through different sales channels. A large domestic OEM used to have two channels. But when they got into financial trouble in the early 2000s they reduced the number of models and scaled back the workforce. Hence both dealers, channel 1 and 2, were in fact close to each other selling the same models. Polk supported a network reduction (consolidation) project in 2005 to identify optimally located channel 1 or channel 2 dealers that could be expanded to handle the sales capacity of two former showrooms.

We hope that our answers have helped you. Feel free to comment if there’s anything you feel we've overlooked or if you have any comments.

If you could not attend the UK seminar, click here to find out about the upcoming Global Network Planning Trends Webinar.

Posted by Tanja Linken, Team Lead Network Management, Europe, Polk (02.10.10)

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