George Pitcher: Growing sceptical about the UK’s car price fixing

It’s fascinating to have the occasional ground-level experience of How Europe Works. Apart from the little irritations of having to show your passport an unnecessary number of times at EU-member airports and the difficulty of finding flights to Italy and Spain in July and August, the dialectic issues on Europe are confined to membership of a single currency and all the economic considerations attached to that.

So it is instructive to have the occasional insight into something that affects one’s everyday life – and the cost of it. Let me relate a story arising from the direct mail on my doormat. The Pitcher family runs a Toyota Previa, one of those middle-class space-wagons that clocks hundreds of thousands of miles on Britain’s school-runs and half-term “welly weeks”. This means that Toyota GB and its local dealerships bombard us with offers, magazines and service-reminders, sometimes for vehicles that we traded in several years ago.

Last week, two letters from Toyota arrived at the same time, intimately related. The first I opened was from Toyota (GB) plc and was a “Notification of Dealer Closure”, advising me that the retail outlet from which we bought our vehicle, Pinewood Streatham, was no longer an authorised Toyota dealer.

This message had the tone of a disciplinary notice – it crossed my mind that the dealership may have been withdrawn for some failure on Pinewood’s part. But this speculation was soon distracted by the information that our nearest Toyota dealer and service-provider was now in Croydon, which is near in the sense that Hammersmith is near to Highgate.

Still, no matter, it was a polite letter, the market representation manager apologised for “any inconvenience [Pinewood’s] departure may cause”, assured me that it was the company’s aim “always to give all Toyota owners the best possible choice and service” and that I could “be sure that no matter where you are, all our dealers work to the same exceptionally high standards”. I started to consider a Chrysler Voyager as the next family car.

Until I opened the next item of junk mail. This turned out to be from Pinewood and was headed “Pinewood Goes Independent!” Pinewood told me that it had been an official Toyota dealer since September 1972 (when I passed my driving test, as it happens) and, in a tone more of sorrow than anger, observed sagely that “we live in changing times and perhaps none more so than those of the retail motor industry”.

Pinewood explained that it was referring to the “debate on competitive pricing against Europe and the very survival of traditional dealer networks”. Pinewood had clearly seen which way the wind was blowing in the EC’s review of Block Exemption regulations, which make cars disproportionately expensive in the UK. We shouldn’t just take day-trips to buy our wine from France, we should buy a car while we’re over there to bring it back in.

Pinewood’s letter was accompanied by a card showing some of the bumper savings to be had by going independent. We’re being offered a saving of &£4,080, for example, on a &£24,075 Landcruiser Colorado GX TD and a good ten per cent discount on the more sedate Previa. This just shows how threatened the comfy, old, costly world of the UK dealership is.

But that’s not really the whole point. Toyota had written to me about Pinewood’s “departure” and “closure”. Technically, Pinewood had departed from Toyota and closed its official dealership, but it’s still there, selling Toyotas – and rather more cheaply to boot. Far from “inconvenience”, it would seem that Pinewood is continuing to offer “the best possible choice and service”, which is the aim to which Toyota lays exclusive claim.

The overall thrust of the Toyota letter was that it had withdrawn from Streatham. And so Toyota (GB) plc has. But Toyota, the motor manufacturer, will happily continue to sell its cars there. So the upshot of this is that the official dealership has closed, with the effect that I can now buy its cars there more cheaply.

This, as I say, is How Europe Works. Barriers to free trade are swept aside and the consumer gets a better deal. Most of the Tory Party thinks this a very bad idea, preferring to secure the head of the monarch on our currency in perpetuity and paying more of it out for cars and much else besides. But that is another story.

More pertinent to the British economy, to my mind, is this. Japanese motor manufacturers such as Toyota and Nissan, which are huge employers of the British workforce, have made a serious issue out of the urgency of the UK joining a European single currency as a pre-requisite for future investment in our country. This is very significantly to do with the UK becoming too expensive for parts sourcing and labour if it remains outside the Euro-zone.

How piquant that such Japanese motor manufacturers should be making that point, at around the same time as European regularisation of markets is driving down prices at the retail end. If single European markets are good news for both manufacturers and consumers, as they would appear to be, it’s really very hard to construct or defend a Eurosceptic argument in the motor industry, or indeed elsewhere.

George Pitcher is a partner of issues management consultancy Luther Pendragon