INTRODUCTION

  The British Independent Motor Trade Association is an organisation established in 1997 to represent the interests of independent car retailers, repairers and parts specialists. None of our ninety members are tied to a manufacturer or official importer.

  BIMTA members collectively turned over in excess of £200 million in 1998 and sold new and used cars sourced from the UK market, other EU states, and also from the Rest of the World. Many of these cars are "parallels". BIMTA aims to ensure that not only do our members have a "level playing field" on which to compete with the franchised dealers, but also to ensure that the BIMTA Code of Practise is adhered to and that consumers can expect a high standard of service from our members. BIMTA members typically offer new and used cars at prices up to 34 per cent cheaper than franchised dealers. Moreover, consumers often show a preference to deal with smaller independent concerns (as many BIMTA members are) for both sales and service. Over the last two years BIMTA officials have formed working relationships with Government departments and Agencies for mutual benefit.

THE REASONS FOR PARALLEL TRADING

  Parallel trading in motor cars in the UK exists for one or both of two reasons only—price and/or availability. Where there is a price differential that is larger than approximately 15 per cent on a particular model between the UK and another market, retailers will be tempted to exploit that differential. Retailers of parallel cars will always have to be able to sell a product for less than the official franchised network so the consumer benefits from a proportion of the saving. Therefore the parallel market provides consumers with price savings and/or improved product availability. It may also provide the consumer with a choice of supplier that otherwise would not be open to them. This is especially true as the franchised retail motor trade is now tending to rapidly consolidate into large, and often impersonal, dealer groups. Furthermore, the advent of "closed" auctions of used cars by manufacturers to their own dealer groups makes the parallel market ever more important as a source of product for independent dealers to be able to compete. The "closed" auction system is another example of manufacturers ever tightening control of the UK car market.

  There are many instances where manufacturers offer different model variants in different markets. With the ever growing sources of information available to consumers now including such mediums as the Internet as well as more conventional publishing etc, customers are now asking for products that are freely available in other markets in the World but not offered in the UK. These are often niche market vehicles which attract customers looking for a very particular type of car.

  Furthermore, there are instances where a particular model may well be offered for sale in the UK, but with a long delivery time. A parallel market may then be created by retailers buying this model in other markets where availability is faster and easier. This is often common with premium brands.

  Both price and product availability of motor vehicles is of course in the control of the official importer and/or manufacturer. However, an official importer may well decide that their own interests are best served by, for instance, maintaining a high price for a model in the UK relative to another market because the actual numbers of parallel imports of that model will be small. Are they better off selling 100 units of model X at £20,000 and putting up with a parallel market of an additional five units, or are they better off selling 105 units at £17,500? To create the same level of revenue at £17,500 as £20,000 they would have to sell 115 units which may well take an increase in overhead expenses. This control of the market is easier to achieve in the UK market than any other EU state as the UK is the only major right hand drive (RHD) country within Europe. Therefore most RHD parallel imports have to come from the Rest of the World and this offers manufacturers more potential for control—such as the use of trademark law to prevent imports (as with the current Honda legal action in the motorcycle business) and the refusal to adhere to normal warranty provisions. There is no doubt that the principle reason that manufacturers and official importers have been able to control prices so effectively for many years in the UK market is that we are a RHD market and suitable product supplies are very limited especially within the EU. Examples of new and used parallel cars that BIMTA members have offered to consumers over the last twelve months are as follows:

  All prices refer to base prices without options. Both UK retail and BIMTA prices may vary subject to exact optional equipment.

TRADEMARK PROTECTION

  Unlike some other products, the car business does not have a problem with the selling of motor vehicles which are counterfeit. There is no evidence of persons attempting to sell a Hyundai (for instance) as a Toyota. BIMTA has suggested to the DTI that the adoption of a policy of Global Exhaustion by the EU should be followed by the possibility of certain industries (for instance, the music industry) being able to apply for "block exemptions" from aspects of the law. There is a clear precedent set in EU legislation with the current Block Exemption that the motor industry enjoys from EU retailing rules. In the case of the car market, trademark holders have affixed their trademarks to goods of their own free will and sold the goods and been rewarded for the use of the trademark. BIMTA believes that it is outrageous that trademark holders could then attempt to use a law which was designed to stop counterfeiting to further restrict trade.

ENVIRONMENTAL AND SAFETY STANDARDS

  Critics of the parallel car market for cars originating outside the EU have attempted to make much of the difference in regulations that exists in the World, particularly those regulations that appertain to exhaust emission levels and also safety.

  There are three principle car markets and manufacturing bases in the World - the USA, Europe and Japan. All these markets have strict exhaust emission requirements and in fact both the USA and Japan required the use of catalytic converters on passenger cars many years before the compulsory introduction of them here in the UK. Furthermore, although safety standards do differ from market to market, there have long been similar standards in both the USA and Japan. The USA was the first market in the World to demand safety standards. Independent tests carried out here in the UK by one of the most respected engine development companies at the instruction of BIMTA (and with the DETR in attendance) have shown that Japanese models made for the Japanese home market do conform with current EU emission standards. With the increasing globalisation of the car market and rationalisation of production, car manufacturers are endeavouring to ensure that models built for many markets are as similar in each one as possible. A look at the sales brochure of any new Japanese model today will show a major preoccupation with safety that includes features such as anti lock braking, airbags and side impact protection.

  Some critics of the parallel car trade will also raise questions over the servicing of some models and supply of parts. These critics are always official importers. The last couple of years has seen enormous growth in the numbers of independent service outlets specialising in a great variety of models and BIMTA members are currently able to exploit the fact that some official importers are refusing to allow their own dealers to handle parallel imports. This has created an excellent profit opportunity for both parts and service provisions. A survey by EVO magazine (a specialist publication) of several hundred readers owning parallel market cars last month revealed no problems over obtaining service and parts for their cars. Moreover, the Consumers Association has continually found that the independent sector of the motor trade delivers equally good service to that offered by the franchised sector.

OTHER INFLUENCES ON THE PARALLEL CAR MARKET

  The UK car market will not offer consumers a truly competitive environment until the Government lifts the restrictions on the use of the Single Vehicle Approval scheme that currently allows only 50 units of each model to be registered per year in the UK. The numbers limitation of this scheme has already been condemned by the European Commission and needs to be lifted as a matter of urgency. This would then allow the closing of the "personal import" channel of importing cars that allows vehicles over three years old to be registered without proper checks being carried out. Although the Government is committed to removing the SVA limits, it is taking too long to carry out. In the meantime the current system makes fraud easier and puts consumers at greater risk. Without an effective SVA scheme it will remain impossible for dealers and consumers to import cars in any numbers from outside the EU, and without that ability to source RHD cars the UK market will continue to be a "controlled" market.

  The Global Economy changes, and the economies of different countries around the World ebb and flow. The parallel market is used to move stock from one economy to another to the advantage of all. In the early nineties the UK car market, especially in the luxury sector, was seriously depressed. Dealers here faced liquidity problems with stock and this was alleviated to a great extent by the exporting of both new and used cars from here to Asia. Many thousands of cars were exported by independent dealers such as BIMTA members who drew cars from all parts of the UK motor trade including, in certain cases, direct supply from manufacturers anxious to keep production lines moving.

  In the last couple of years the UK economy has been strong enough to allow cars sitting in, for instance, Singapore unsold as a result of "Asian Flu" to be sent to Europe and sold here. This has helped the trade in Singapore to recover and, in turn, allowed European manufacturers to ship new stocks to that market. Therefore the parallel market can, and does, benefit not only the consumer, but other less obvious sectors of economies.

  The cleverer manufacturers around the World "use" the parallel market to help their own ends. This is often at odds with the interests of local agents in various markets, but manufacturers priorities are often different in the short term. For instance, one leading European vehicle manufacturer has for many years "played" the parallel market by supplying agents in countries with models that have no chance of selling in the particular market. The manufacturer knows that these cars will end up in markets such as the UK, but needs to provide its agents—normally in under developed countries—with a source of income so as to keep a valuable service establishment viable. The service establishments are necessary to look after diplomatic cars, UN cars, and buses and trucks in markets where there may well be almost no sales of passenger cars to local customers by the manufacturer in question. Currently BIMTA members are being sold certain new cars in Tokyo that manufacturers in Japan are fully aware are coming to the UK, despite the efforts of the local official agents here to stop the supply. This presumably is to help dealers in Japan stay in business while they endure a very slow home market.

CONCLUSIONS

  BIMTA urges the Committee to recommend to the Government the following:

—  The lifting of the numerical limits on SVA as a matter of urgency.

—  The adoption of a Government position that the current Trade Mark Law should not be used to stop the parallel trading of goods which are obviously not counterfeit.

—  The adoption of a policy of Global Exhaustion by the EU, with the possibility of exemptions for certain industries.

16 March 1999