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Introduction
The car manufacturing could be one of the largest industries in Europe. This industry produces cars for different countries in which the manufacturers are facing several issues. Doing such business in Europe can be challenging as there are some existing legislations that they need to follow, which could greatly affect the industry’s profit. Competition among car manufacturers in the European Union is very high. Each company may have their own marketing strategies, despite the economic challenges and competitive issues among the car manufacturers in the industry while ensuring that existing laws are strictly followed. There are even laws that regulates the competition among car manufacturers that could increase the pressure and challenges among the industry players. However, there are some strategies that these car manufacturers are exercising so as to follow the existing laws’ provision as well as to meet their customers’ needs and expectations.
Car Manufacturing in Europe
There is a Competition law that is being imposed by the European Union that provides rules for vehicle sector in Europe. The European Commission published the frequently asked questions regarding the EU Competition Law application (lexology, 2012). These set of questions aim to answer a number of inquiries, which the European Commission received from European Union competition authorities and European Union stakeholders. Queries were about the application of competition law in the vehicle-manufacturing sector. The law provides some rules regarding the sales as well ad the repairs of motor vehicles including the distribution of the vehicles’ spare parts. The impact of the queries does not include some particularly more extensive guidance than existing EU competition law regulations, but it provides additional guidelines so as to assist car manufacturers to assess whether their existing agreements are complying with the EU competition law. Such law deals with several topics such as servicing of leasing contract perspective, warranties, spare parts supply, purchase and use of repair tools, technical information access as well as the authorized repair network access. The EU competition law ensures that the vehicle manufacturers using their market power will not distort the government efforts. However, based on its rules and provisions, it has to ensure the free competition’s existence instead of monopolies and cartels that share out market and fix price. The Competition law of the European Union is somehow similar to the United States’ antitrust law.
Besides the competition, the European car manufacturing industry is facing another challenge, which affects their car sales. According to Angelo Young (2013), the European Auto Market could take more years to recover from its car sales level as they are back to the pre-crisis stage. There was an estimate that the car manufacturing industry would continue to decline until the end of 2013 and will continue for several more years. In addition to the problems, European consumers are being more attracted to smaller cars than the bigger ones, which directly affect the manufacturing industry’s income. Thus, the existence of short-distance driving and longer periods of purchases make it worse.
Moreover, younger generations are being less interested to own a car across the developed countries (Young, 2013). In fact, the Automobile Manufacturers in Europe reported that new car demands within the European Union’s twenty-seven member states recorded a seventeen-year low in terms of their sales, which only gave them a total of twelve million sold units (Young, 2013). This could be a bigger challenge as these car manufacturers mainly rely on their sales to continue their business. The European car manufacturing industry may be at crossroads in which many car factories are underused or sometimes idle.
Issues with car sales as well as the competition law could make it more challenging for car manufacturing industry. As the reform for distribution of car rules are being implemented, the car manufacturing industry in Europe may be at its low point (Colino, 2010). In some other countries, car sales may have been good in recent months, but these solitary increases in demand may be consequential to government stimuli to buy new motor vehicles. United Kingdom and Germany are some of the countries that have encountered such demand increase. IN fact, the cars sales in Germany increased by twenty seven percent during the start of year 2009 as an outcome of incentive that encouraged consumers to have their cars upgraded. United Kingdom had a thirty one percent increase in their car sales during the same year as the result of the UK’s government scrappage movement.
Looking far beyond these results, a bigger picture shows a very distinctive reality (Colino, 2010). For many years, European car manufacturers have been going through an increasing and significant drop in their sales. The figures may have been an alarming event among car manufacturers, which made them, worked and developed strategies to promote their product efficiency as well as to outrun their competitors. However, the result provided a very different reaction. When it comes to car manufacturing competition, there was a great impact that the car distribution agreement has provided. Such agreement made the car manufacturers to cope with the additional pressure because they have to comply with complex and costly European rules and regulations (Colino, 2010).
Failure to comply with the agreement’s provisions led the imposition of fines on some of the leading car manufacturers in Europe. An example would be the fine of €50 million that Peugeot paid because of export obstruction. Therefore, it is clear that no conditions must competition policy must be influenced by the sector’s interests; this past mistake led to inconsistencies in the industry’s regulation.
The new Competition law has its own strength in terms of the guidelines. The law’s guidelines complete the instruments for the car-manufacturing sector. By complementing the guidelines on vertical restraints, it explains the Automotive Block Exemption Rules and suggests The European Commission’s view on law applied to the new vehicle sales, spare parts distribution as well as the motor vehicle repairs (R2RC, 2010). In practice, these guidelines are very essential. Although they are only binding based on European Commission, no enterprise may afford to ignore them because they somehow explain, interpret, and expand the provisions of regulations.
The new Competition law provides that the car manufacturers may not deter their original equipment suppliers from supplying their own products as spare parts to other distributors (R2RC, 2010). To satisfy the consumer demand, spare parts producers can also supply the independent market with products of higher quality compared to original product. The process would of course fulfill the legal requirement; especially those enclosed in the environmental and product safety legislations. For independent repairers, they are also free to purchase as well as to use any parts for maintenance and repair of vehicles. As long as all the legal requirements are met, especially those are enclosed in environmental and product safety legislations, independent repairers can purchase equipment and parts use for repair and maintenance.
The competition law affects the distribution of vehicles, exempting the dealership agreements, the manufacturers’ after sales and spare parts, the cartel investigations update, and the state aid (klgates, 2012). The competition law may also have an effect of the car manufacturers’ future business strategies. Generally, allocating dealers give wider, but not its total control of the sales between territories. Moreover, dealers may sell to intermediaries in the absence of the manufacturer’s permission.
Relatively, the car manufacturers, based on the competition law could not just impose pricing controls over their dealers. However, the manufacturers may issue their recommendations and even maximum prices, but not the stipulation of fixed prices (klgates, 2012). With this provision of competition law, car manufacturers may not have the full control of their pricing in which will greatly affect their current financial status. In addition, this provision will somehow predict the future financial status of a certain car manufacturer in terms of their current pricing including the factors that may hinder their future profit increase.
In the world of car manufacturing industry, competition may not just be present within the country where the manufacturer is located. They have to think bigger in terms of anticipating their global competitors. Besides the competition, there are many challenges and opportunities that the European automobile industry is facing (klgates, 2012). The car manufacturing industry in European Union is now facing some severe challenges such as the need of closing the gap in productivity, technology and quality with Japanese manufacturers and US producers who are now trying to adopt lean systems of production, and the manufacturers’ need to develop a strategy for post-national car manufacturing industry that is global in nature more than just a European.
The strategies that the car manufacturers are creating are not just being developed to outrun their competitors. The industry players are also developing plans so as to increase their competitiveness and create a sustainable car manufacturing industry. Additionally, the European Commission adopted the “CARS 2020: Action Plan for a competitive and sustainable automotive industry in Europe” (clepa, n.d.). It ensures the car manufacturing industry’s competitiveness and sustainability by year 2020. This is a good development plan so as to keep the industry’s business running, despite the current economic situation in Europe. It will enhance the industry’s conditions in terms of the present cost pressures that are necessary to maintain the manufacturing base in Europe. The plan would also improve the industry’s competitiveness in the global market in which will maintain and strength the industry’s position when it comes to international trade negotiations. Moreover, it will provide a sustainable mobility among the industry players, by encouraging them to act with comprehensive approach to carbon dioxide, noise emissions and pollutants, and even the road safety. With these action plans, car manufacturers are not just focusing between competition and sales, but they efforts will benefit more of the consumers’ side. This is also a way of being environmentally responsible, which car manufacturers must normally practice.
The European Union, together with the European car manufacturing industry are showing their preparedness as they may not be able to exactly predict what will future bring in the industry. Thus, working on a common goal together with the competitors will ensure the stability of the industry they belong to, while keeping their company sustainable whether or not the economy is in good shape.
Another common goal, as part of their organized interests is the maximum noise reduction level, which will be completed in the next twelve years (acea, 2014). The European automotive industry is welcoming the European Parliament’s discussion conclusion regarding the reduction of noise levels among manufactured cars. Based on the European Parliament (acea, 2014), the rules regarding the noise reduction will phase in its new limits in 2016, 2020, and the final would be on 2024. Future manufactured cars will have a lower noise level as concluded and ruled by the European Parliament. This combined efforts are beneficial both on the manufacturers’ part as they will have another competitive advantage over the next few years, and will also benefit the consumers as they will have the opportunity to own a more quiet car.
Conclusion
The car manufacturing industry in the European Union faces numerous challenges in their business. However, these issues will be addressed through extensive efforts that are being exercised by car manufacturers as long as their actions are inline with the existing laws and legislations. These car manufacturers are not just mere competitors of each other, but they can work together with the government to obtain a common goal that will benefit both the car manufacturers and their consumers. The competition law may just serve as a minor challenge among the car manufacturers. What matters most is it goal of providing a partial treatment between car manufacturers, their consumers, and the manufacturers’ equipment and parts suppliers. These organized interests are also beneficial to the car manufacturing industry in general. Thus, promoting a healthy and high quality competition among the industry players especially the key companies of the industry.
References
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