Despite continuing evidence to the contrary, the European Commission has stressed that the new rules on vehicle sales throughout the EU are working and that it's only a matter of time before new car prices in Ireland begin to fall.
Irish motorists have seen the cost of new vehicles rise steadily as manufacturers began to harmonise pre-tax prices across Europe during 2003. Despite these increases, which are a direct result of the new Block Exemption regulations, Paulo Cesarini from the European Commission's Competition General Directorate, has assured Irish consumers that the rules will, in the long-term, mean greater competition and cheaper cars.
"One has to be careful when talking about recent price increases," he said. "It's still too early to assess the real effect, but Block Exemption is doing what we expected and is fulfilling its objectives."
However, Cyril McHugh, chief executive of the Society of the Irish Motor Industry (SIMI), disagrees. "Prices may have been reduced in the Europe's major markets such as Britain and Germany, which combined make up almost 50 per cent of Europe's new car market, it's smaller high-tax countries, such as Ireland, where the reverse is true."
Most of the new rules came into force in October 2003, aimed at opening up the new car market as well as servicing and repair to give consumers more options.
Increased competition, higher standards, unhindered cross-border trading, multi-branding in showrooms and approved independent repair centres, which mean motorists have a choice of where to get their car serviced and whether to use cheaper (but similar quality) spare parts, are all set to become a reality, says the Commission.
Although serious issues remain to be ironed out, such as reluctance by some manufacturers to share technical information with independent repairers, and the insistence of others to compel dealers to meet very specific showroom standards, Paulo says that progress is being made.
"The regulations have been widely followed, and the industry has shown a willingness to adapt." However, he admits that there is still some way to go and his office is monitoring certain areas closely. Multi-branding - the selling of more than one make of vehicle by a dealership - is one area that he says "is not making its way at the appropriate speed."
The full consumer benefits of Block Exemption will not be felt until 2005 when cross-border retailing becomes an option. In October next year the final obstacle, the location clause, will be removed.
As Tilman Lueder, spokesman for Competition Policy Commissioner Mario Monti, explained: "The big breakthrough will obviously be the lifting of the location clause which allows dealers to open subsidiaries and warehouses in other member states." This, he said, means dealers "coming to seek the customer, instead of the end customer having to seek a better deal abroad."
In the meantime, he said, issues surrounding Block Exemption can be addressed without major action. "At this stage the problems are not that grave that the Commissioner feels the need to take them up at a political level."
Others disagree and have called for the Commissioner to take action now.
"Because Ireland, as with several other EU countries, has a punitive level of Vehicle Registration Tax, car manufacturers have traditionally subsidised pre-tax prices here," says McHugh. "But these subsidisations have come to an end with the introduction of Block Exemption."
"If the Commission is really serious about reducing new car prices, it needs to tackle VRT."