Expert support in automotive distribution disputes

Steve Young

Publication Number: Legal 1

Author: Steve Young

Date: July 28, 2016

Tags: Automotive regulation

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Changes in automotive distribution are likely to lead to increased tension between vehicle manufacturers and their independent distributors and dealers.  Given the substantial investments involved and the highly competitive nature of the industry, we anticipate that these tensions will lead to more disputes, and for a growing number to enter into formal court proceedings or arbitration.

There have been many technical and process advances in the automotive industry over the last couple decades.  However, in the distribution area – what happens after the vehicle leaves the factory gate through the sales and aftersales processes – the fundamental business model has not changed despite many new pressures:

  • The internet has had a widespread impact on the buying process, requiring more investment in the online world, and raising questions around data capture and ownership
  • Despite much of the customer journey moving online, manufacturers now require dealers to invest more in dealerships, with €10-€20 million spend per site not being unusual
  • As markets mature, the pressure for performance has increased, with higher demands being placed internally and on trading partners
  • The product offer is becoming more complex with new services that challenge the traditional buy-sell relationship and carry additional operational and financial risk

The sector is going into a period of disruptive change – incremental changes which in themselves do not appear significant, but cumulatively over 5-10 years will result in a new business model emerging, with some new players leading, but some traditional players left behind or gone completely.

Relationships – formal and informal – which were adequate in the past are coming under strain.  Questions are frequently raised about the “balance of power” related not only to vehicle manufacturers, but also to other players who dominate certain sectors including insurers in the crash repair sector and parts suppliers in the aftermarket.  There are many areas where legislation and regulation has been imposed, specifically targeted at maintaining a competitive market and protecting both the consumer and business partners from restrictive practices and anti-competitive behaviour on the part of the vehicle manufacturers.    This supplements the normal commercial and consumer legislation – but does not in all cases extend the protection that this already offers.

We therefore expect the tension, disruption and imbalance of power to lead to higher levels of legal disputes in the industry.

Please download our full paper by following the link on the right.