Protected spare parts: are purchasing power problems soluble in the competition?

Gilets Jaunes handling spare parts
On March 5, after referring to the pope of liberalism Friedrich Hayek, the French PM Edouard Philippe, in the context of the celebration of the tenth anniversary of the French Competition Authority, continued his speech as follows: "Competition is obviously not the solution to all problems. But it is one of the solutions to the purchasing power problem that our society is facing (wink Gilets Jaunes). While the State of course has the fiscal and budgetary levers to meet this challenge, we must also tackle another aspect: that of "constrained" spending. These expenses that we cannot do without and whose every unjustified increase is like a hidden tax. The time has come to absorb some of these "blind spots of purchasing power"." 
 
In fact, it will be recalled that in 2012, through a self-referral, the ADLC took an interest in the maintenance and repair markets and, on statistical bases whose fragility was demonstrated by the manufacturers and their lawyers at the time (1), claimed that "in a market of EUR 1,8-2,6 billion, the lifting of the protection of visible spare parts could generate an average gain for consumers of around EUR 200 million'.
 
If we relate the hypothetical savings to the total fleet held or made available to French households (35.1 million vehicles in 2017 according to CCFA - committee for french car manufacturers), this would correspond to a saving of 5.70 euros per vehicle per year, whereas in 2017, the total expenditure on parts per vehicle was, according to national accounting data, 738 euros.
Since the "skin" parts in question are mostly paid for by insurers rather than by households, it is unlikely that any reduction will be passed on to households.
We are here in the symbol or even in populism: it is a matter of pleasing the ADLC and trying to seduce the "Gilets Jaunes" by claiming to defend their interests against the abuses of large companies that would levy the famous "hidden tax".
 
Beyond the error of economic analysis that we tried to point out at the time, we can wonder about the political process of letting it be assumed that purchasing power problems would be soluble in competition and/or that the defence of free and undistorted competition would be the guarantee of industrial efficiency.
In February, when Brussels opposed the Alcatel-Alsthom merger, we heard the same Edouard Philippe denounce a "bad decision" and indicate that the competitive credo could not constitute the alpha and omega of industrial policy in the context of current global competition.
He was right and, in the automotive sector, as the ACEA President recently pointed out, the aid that manufacturers will need to support their efforts in the field of forced electrification must be able to be distributed without the Commission getting upset if the EU wants to prevent other large regions of the world that are less principled from succeeding in this change better than it is.
 
In the distant past (2), the construction of a European automotive industry organised the free movement of vehicles by doing everything possible to prevent the opening of markets from leading to a price war that would have laminated manufacturers' margins and affected their development capacities.
Even when, under Mr. Thatcher, the United Kingdom structured itself as the bridgehead of the Japanese offensive, everything was done - in particular by imposing important local content - to prevent this from happening. Then, from 1991 onwards, with the disappearance of the Common Market Manufacturers' Committee from which non-European manufacturers were excluded and its replacement by ACEA, which welcomed American, then Japanese and Korean manufacturers, and then with the arrival of the "New Member States", this pragmatism faded somewhat and the EU allowed significant overcapacity to develop, as revealed by the 2008 crisis.
It has also applied the principles of free movement of goods within the Union to the new Member States without distinction. It has thus allowed second-hand vehicles to be imported on a massive scale into the countries concerned and nip in the bud, thus netting the emergence of new vehicle markets. In short, for just over twenty years, it can be argued that the EU of the automobile industry would have gained by tempering its liberalism and its defence of competition.
 
In general, there is clearly a tension between the short-term defence of low prices obtained by competition and the preservation of employment, the quality of products and services, wages and training.
Today, maintenance and repair suffers from a lack of willingness to pay on the part of many households, which is perfectly perceptible in the public's acceptance of the increased roadworthiness test. It refers to the fact that vehicles rarely break down and can often continue to drive in "degraded mode".
Reparation is then effectively experienced by forced households with old vehicles as a kind of "hidden tax". Professionals then have difficulty in having the value of their services recognized and the implicit message delivered by the Prime Minister tends to increase this difficulty by suggesting that liberalization could reduce their bills.
 
However, if the automotive services are to continue to do the work expected of them, it is necessary to preserve the availability of parts collections and, above all, to finance the equipment and training that the increasing technicality of the products requires. In this context, to suggest that professionals "stuff themselves" with parts or labour is to take the risk of bad professionals chasing the good ones and dubious technical solutions taking precedence over the "rules of the art".
It is, as is the government's temptation regarding driving schools, to suggest that "innovative" or even "disruptive" solutions could advantageously replace professionals, the expensive parts they offer and their shameful time scales.
Faced with the different forms of ubiquity, it is urgent to have the value of work and training recognized. It is not certain that saying that competition "is one of the solutions to the purchasing power problem facing our society" goes in this - good - direction.
 
(1) We can read on the website of the firm Vogel et Vogel, which then led the counter-offensive for a united front of the CCFA and the CNPA:
"A statistical table published in this sense by the press and taken from the opinion of the Competition Authority proved to be false, as the Authority first compared in its public consultation document Eurostat data that were not comparable between the different European countries because they did not bring together the same realities and then, in a second stage, essentially the marginal do-it-yourself, when in reality the comparison of increases in parts and after-sales prices shows that the increase in France is lower than that of many unprotected countries".
(2) See on this subject: Jullien B. ;Pardi T. ; Ramirez S. (2014). "The EU's government of automobiles: From'harmonization' to deep incompleteness", in B. Jullien and A. Smith: The EU's government of industries: Omnipresent, incomplete and depoliticized, Routledge, United Kingdom.

 

La chronique de Bernard Jullien est aussi sur www.autoactu.com.

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