EU Deregulation and dealer-supplier relations in automotive distribution

Purpose The automotive industry in the European Union (EU) faces a sharply reduced regulatory environment, with Block Exemption (1400/2002). Economists have predicted fundamental changes in the market as a result of the modified Block Exemption. In this article, the aim is to investigate how the relationship between a car dealer and its main supplier (i.e. an OEM or its national representative), affects how the dealer perceives threats and opportunities in this more competitive environment.

Design/methodology/approach - Based on relationship marketing theory, propositions about antecedents and consequences of commitment to a supplier are formulated for the changing automotive market. Data were collected from 413 car dealerships in Belgium, The Netherlands and Finland, countries without domestic automobile brands.

Findings - Commitment to the main supplier is mainly driven by satisfaction and trust. The more car dealers are committed to their main supplier, the lower the threat they perceive from new intermediaries, and the lower their intention to expand their business beyond the current relationship. Commitment to their main suppliers also reinforces their confidence in the future. This confidence in the future spurs dealers' expansion plans within their current relationship.

Research limitations/implications - Longitudinal research would allow better inferences about market evolution and causal sequences.

Practical implications - Satisfied and committed dealers seem reluctant to make radical changes in their relationships and marketing strategy, apparently being entrenched in traditional channel structures. The modified Block Exemption could increase the average size of dealerships, improve the competitive position of large dealers, accelerate consolidation in the automotive distribution sector, and decrease competition between traditional dealerships. Opportunities have been created by the modified Block Exemption for new entrants to capitalize on new market niches and customer categories. Multi-brand dealers could use these opportunities to create a purchasing experience that differentiates them from the traditional dealers.

Originality/value - Contributing to scarce research on complex channel relationships within a captive distribution structure, this is the first empirical study of the European car industry in the context of the modified Block Exemption. It is also one of the few studies that takes the perspective of the dealership.