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Dealers set free

Trade and Industry Secretary Stephen Byers plans to loosen carmakers' stranglehold over franchised dealers after the Competition Commission found new-car buyers are overcharged by up to £1bn a year.

Dealers are optimistic that the report will end months of uncertainty over new car prices, releasing pent-up demand. Mr Byers promised to “take immediate steps” to implement the Commission's recommendations.

These include “substantial changes” to new car distribution, “particularly in the relationship between manufacturers and dealers”, he said. “Suppliers' current arrangements are not delivering cars to the private consumer at competitive prices.”

The 737-page report found new car prices were “between 10% and 12% higher” in the UK than in some European countries. It concluded that UK buyers were “paying about 10% too much” on average, after taking account of discounts, trade-ins and finance deals.

This figure left manufacturers claiming victory, pointing out that 10% was significantly lower than the 30%-40% price differences claimed by consumer bodies.

Mr Byers believes dealer groups should be able to obtain similar discounts as those enjoyed by fleet operators.

But while he blamed Block Exemption for causing higher prices, he conceded Britain alone could not force its abolition. The DTI is discussing possible solutions with the European Commission, though Block Exemption will not be reviewed until September 2002.

Instead, Mr Byers intends to force carmakers to give dealers “who buy cars outright” the same terms, including bulk discounts, as large fleet buyers.

Carmakers and dealers have until May 19 to comment on the proposals.

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