The current block exemption order, which forms the basis for contracts, expires at the end of September with a follow on regulation that comes into force on October 1, 2003. This effectively allows a 12-month transition period for dealer contracts.
AM understands that BMW and Volkswagen Group are holding talks over which garages to cut from their networks. Audi has sent one-year termination notices to dealers it wants to retain while issuing two-year termination notices to those that have no future with the franchise.
However, Adrian McMullan, of Nottingham Business School, believes the move is unlikely to bring a significant decrease in network size. “Manufacturers could try to bring fresh blood into the network and rationalise their existing operation. The flipside is that dealers who have been cut off could theoretically set up as independents and gain approved status,” he says.
Prof Garel Rhys, of Cardiff University, urges carmakers to let market forces decide. “If manufacturers try to downsize by imposing conditions it will be going against what block exemption is trying to achieve,” he says. “The dealer network will downsize naturally because there are too many retailers and so some will go bust while others will fold as people retire.”