European automotive after-market set for shake up

In a move which will have a major impact on the European automotive logistics sector, the European Commission looks set to liberalise the car parts market. This comes in the face of fierce opposition from the automotive lobby whose members have up to this point enjoyed considerable protection from competition. In particular German and French commissioners are opposing the move which has been driven through by the free marketeering EU internal market commissioner, Frits Bolkestein.

While vehicle manufacturers would keep the majority of their intellectual property rights to their vehicles, they would lose monopoly rights on visible spare parts, ie headlights, wipers, bumpers etc. If adopted it would give vehicle owners the power to source their parts from potentially lower cost manufacturers resulting in lower prices. This would have a considerable effect on the industry – a McKinsey report estimates that in 2000 European vehicle manufacturers made 39% of their gross profit from spare parts but only 18% from manufacturing.

The change in regulation would lead to a far more fragmented market for the logistics sector associated with the distribution of spare parts. At present some of the deals involved are massive. For instance earlier in the year TNT Logistics renewed a five year deal with Fiat which was estimated to be worth €1bn over its lifetime. Many of the other major logistics companies also have similar deals either on a European or national basis. The changes could result in the growth of shared user networks, whilst dedicated contracts the size of those between Fiat and TNT may become a thing of the past.