Fresh battle looms over car spare parts

Date: 09/03/2000

By Renée Cordes

Every year, the average car owner in the EU spends €250 on spare parts. With the typical vehicle lasting up to 15 years, the costs can add up quickly.

In some cases, the spares are used to replace parts which have worn out over time. But mostly, they are needed to restore the vehicle to its original appearance to the extent that it is possible following a crash or other mishap.

Currently, motorists shopping around for the best deal on 'visible' spare parts such as windshields or dashboards generally have several options: they can order brand-name parts directly from the car maker, buy them from a manufacturer-authorised official garage, or go to an independent service centre which may offer the same spares for up to 50% less. With a growing number of companies world-wide now selling spare parts over the Internet, the choice is even wider.

Consumers generally make their decision based on price, availability and what they perceive to be the best quality. However, their options may sometimes be limited by the car maker's own guarantee, which requires them to get their vehicles serviced by licensed operators, or by their insurers, who may not alert them to cheaper deals than those offered by the car manufacturers or licensed dealers.

Soon, if many of Europe's largest car makers get their way, that choice will be restricted even further.

The industry is once again demanding that it be given special rights to protect its designs by preventing rivals from making copies of certain visible spare parts. But it faces tough opposition from the independents, who would no longer be free to sell their own generic versions and argue that giving the car makers exclusive copyright over some parts would give them a monopoly position.

"On the one hand the manufacturers want to expand this part of their business, which offers interesting margins, but some suppliers want a piece of this pie as well," explains Christian Breitsprecher, an analyst at Deutsche Bank in Frankfurt. "The difficulty comes when the auto maker says that an independent cannot reproduce certain parts which it has designed. There we find ourselves in a grey area of the law."

The European Commission will spend the next few months trying to hammer out a solution to this dilemma.

Car manufacturers already control about 60% of the total spare-parts market (also known as the after-parts market) and are seeking to increase their share even more. Many are reportedly buying up independent garages and incorporating them into their own networks, although few - if any - are willing to admit to doing so. Their motives are simple: the 'after-parts' market offers operating margins of about 5%, nearly double the average of car companies' overall business.

At the same time, independents which do not earn as much from selling brand-name parts are seeking to increase their own market share by selling generic designs at lower prices.

They can currently do this almost anywhere in the EU without restrictions, except in France, which only allows its own licensed car makers to sell branded spare parts. But the question marks surrounding the future of the spare-parts market extend well beyond France's borders, and the Commission is now seeking to provide some legal clarity.

It has asked car manufacturers, parts suppliers, consumer groups and insurers to provide data concerning the size and nature of the spare-parts market, with a view to encouraging the industry to agree a voluntary code to protect the design of some components.

Answers to the questionnaire, which are due within the next few weeks, will help the Commission to decide whether the EU should extend its existing design protection rules to include dashboards, fenders and other visible spare parts crucial to a vehicle's overall appearance. This specialised sub-group accounts for more than 85% of the overall spare-parts business.

The debate comes as the European Parliament is discussing amendments to an EU-wide regulation governing the protection of industrial designs which entered into force in 1998 after protracted negotiations between Union governments.

After years of wrangling, French-led attempts to include visible spare parts within the scope of the legislation were defeated, leaving policy-makers to wrestle with this difficult issue again later.

The rules agreed in 1998 allowed member states to retain existing national regulations governing the spare parts markets, but barred them from introducing any further measures to restrict independent manufacturers' activities. This was designed to ensure that any changes to domestic legislation would be in the direction of further liberalisation.

However, the Commission promised then that it would review the situation later and might propose specific legislation to govern the spare-parts industry if it felt this was justified following consultations with interested parties.

But before it decides on the best way forward, the EU executive is gauging interest in striking a voluntary accord.

Three years on, the car and spare-parts industries remain at odds over whether the law should be extended to cover components, with the former clamouring for more legal protection while the latter insists the rights of vehicle manufacturers are already adequately protected.

Marc Greven of the European car lobby group ACEA warns that getting a voluntary deal would "not be easy". He points out that the debate over design protection for spare parts has been raging for at least seven years and says there are still deep divisions within the car industry itself over the issue.

Spare-parts makers are urging the Commission to press ahead with efforts to find a solution, arguing that car makers are increasingly getting into the business of selling brand-name spare parts.

"We are in favour of granting design protection to the body of new cars so that the European car industry can defend itself against copying by Japanese car makers," says Gerhard Riehle of ECAR, a lobby group which represents independent spare-parts makers, consumers and insurers. "But this should not be extended to give car makers a product monopoly in the after-market."

The independents' fears have been fuelled by last month's news that three of the world's top car makers intend to set up an international online electronic exchange for motor supplies. General Motors, Ford and DaimlerChrysler plan to join forces to create the world's largest electronic marketplace, in a venture which could involve tens of thousands of suppliers.

In some cases, the brand-name parts sold by car manufacturers have in fact been made by outside suppliers and the venture is aimed at allowing the three firms involved to cut costs and save time by ordering supplies jointly.

But critics fear that it may be a precursor for further attempts by the big manufacturers to lure even more private consumers to their own supply chains, reinforcing their dominant position in the market place.

Major feature.