CSES Automotive Competitiveness Proofing - Final Report - 06 12 2013

Ref.
Ares(2014)817670 - 20/03/2014
FRAMEWORK CONTRACT ENTR/2008/006

LOT N° 2: IMPACT ASSESSMENTS ON ENTERPRISES AND MICRO
ECONOMICS
Specific Assignment
“Tasking for Competitiveness Proofing: Ex-ante evaluation of
competitiveness impacts of identified options for a Commission
policy proposal on the Review of Directive 2007/46/EC relating to
the approval of motor vehicles”
Final Report
Prepared by
Economisti Associati srl (Lead Firm)
in collaboration with
Centre for Strategy & Evaluation Services
6 December 2013
Tasking for Competitiveness Proofing: Ex-ante evaluation of competitiveness impacts of identified
options for a Commission's policy proposal on the Review of Directive 2007/46/EC relating to the
approval of motor vehicles
Table of contents
Table of Contents
SECTION PAGE
Executive summary
1. Introduction and methodology 1
2. Background and analysis of automotive sector 7
3. Analysis of the impacts of the policy measures 36
4. Assessment of the need for an advanced study - Proposal 65
5. Conclusions and recommendations 68
Appendixes
A. PRODCOM/UN ComTrade product codes 72
B. References/Source 75
C. Comparison of NLF and Motorcycles Regulation 168/2013 provisions 78

Executive summary
Introduction – Objectives of the study and methodology
This study was carried out as part of the Commission's impact assessment process on a possible proposal to
enhance the legal framework for the type-approval of motor vehicles by including provisions for market
surveillance taking into account the solutions offered by the New Legislative Framework (NLF). It follows a
public consultation involving stakeholders in the EU automotive industry in 2010 and an Impact Assessment
1
Roadmap published the same year and an Ex-Post Evaluation and Impact Assessment Study that was
2
completed in 2012 .
Five specific policy areas are examined and the respective policy options within each area following the
different options considered by the Impact Assessment study. The policy options examined were:
 Policy Area A: Requirements on the traceability of products and responsibilities of economic operators
that include an amendment of 2007/46/EC Directive clarifying the responsibilities of economic operators,
importers and distributors and introducing product and company traceability requirements.
Manufacturers will be required to ensure that their products bear a type, batch or serial number or other
element allowing their identification. Economic operators will be required to retain full details of all
businesses to which they have supplied, or which have supplied them with, vehicles and/or automotive
devices.
 Policy Area B : Responsibilities and cooperation of enforcement authorities, including amendment of
the 2007/46/EC Directive to clarify the roles and responsibilities of enforcement authorities in line with
the NLF.
 Policy Area C: Quality of type approval and conformity of production tasks carried out by Technical
Services. Introduction of criteria for the financial and technical independence of Technical Services and to
promote greater co-ordination through a Technical Services co-ordination body.
 Policy Area D: Post safeguard measures and recalls – Introduction of a two-step approach for safeguard
measures in line with the principles of the NLF Decision 768/2008/EC.
 Policy Area E: Procedures for ensuring conformity of production - Introduction of requirements for the
verification of Conformity of Production (CoP) that cover the assessment of quality management systems
for production, and product-related controls through inspection and testing, under surveillance by the
relevant authorities.
The purpose of this study was to conduct a Competitiveness Proofing analysis of the combination of policy
options considered the most feasible as a result of the Impact Assessment study.. This competitiveness
proofing study has assessed the impacts of this combination of policy options on:
 The cost of doing business
 Capacity to innovate
 International competitiveness of the EU automotive sector.
Particular attention was given to the impact on SMEs arising from the proposed policy options and the possible
mitigating measures that would need to be introduced.
This study provided a basic assessment of the impacts based on a qualitative analysis. An additional objective
of the study had been to assess the need for a more advanced analysis to provide a quantification of the
impacts identified.
1
EC Roadmap,
http://ec.europa.eu/governance/impact/planned_ia/docs/2011_entr_011_enhance_implementation_internal
_market_motor_vehicles_en.pdf
2
RPA (2011), Ex-Post Evaluation and Impact Assessment Study on Enhancing the Implementation of the
Internal Market Legislation Relating to Motor Vehicles
i
Executive summary
Basic features of the automotive sector
The scope of the proposed measures, and consequently that of our own study, is rather wide. It covers the
manufacturers of the various types of motor vehicle, parts and components (including tyres) and also the
aftermarket segments that include manufacturers of spare parts, accessories and garage equipment, providers
of repair services and wholesale and retail traders of motor vehicles. It also includes providers of various types
of specialised services including the designated Technical Services. The total size of the market in 2011 was
€520billion, €300billion of which was from motor vehicles and €160 from parts and components. The total
turnover of the automotive manufacturing sector reached €740 billion in 2010, representing about 8% of total
EU manufacturing.
A key feature of the automotive sector is its tiered structure which includes a rather small number of large
multinational motor vehicle manufacturers that produce passenger cars, commercial vehicles and tractors and
“Tier 1” level suppliers of main systems, components and tyres, along with a much larger number of small size
Tier 2 and Tier 3 suppliers of individual components. In the aftermarket segment, there are two main
distribution channels: those authorised (linked to specific OEMs) and the independent manufacturers of spare
parts and the relevant traders, plus the providers of maintenance and repair services. The large majority of
these firms are small or medium size enterprises. Along with the large OEMs there are also a few specialised
niche markets including sports cars, motor homes, trailers and semi-trailers and also special purpose vehicles
like taxis and ambulances. In contrast to the market for the main categories of motor vehicle, which are
European or even global, most of these other markets – with the exception of sport vehicles - are
predominantly national and are dominated by small size producers.
The EU represented in 2012 the largest single market in the world for motor vehicles with a 17.5% share of the
total global sales, 20% of the passenger cars market and 8% of the market for commercial vehicles. However,
this share is gradually decreasing - it was 26% in 2005 - as demand in emerging markets (China, India, Latin
America) is continuously growing. This has implications for the location of motor vehicles production activity
with more new plants being located in these countries. In the commercial vehicles sector, particularly heavy
duty vehicles, manufacturing in emerging markets already represent more than 65% of global production
Production of motor vehicles within the EU is concentrated in a relatively few countries (Germany, France,
Italy, UK, Spain, Czech Republic and Poland) while a number of Central and Eastern Europe countries (Hungary,
Slovakia, Slovenia) have developed into important centres for the production of parts and components with
important levels of FDI from inside and outside Europe.
The automotive industry – excluding the tyres segment – has a significant and an increasingly positive trade
balance in all the main segments (total of €107 billion in 2011 from €54 billion in 2004), mainly driven by
passenger cars. However, there is increasing competition for the EU automotive industry on a worldwide scale,
particularly coming from manufacturers in India and China that already have significant shares in their own
domestic markets. So far, there is a limited presence of these manufacturers in EU markets However,
companies like the Indian Tata, which intends to export revised versions of its cheap NANO model to the US
and Europe, are planning to change this situation.
Investment in R&D and innovation represents a key aspect of the competitiveness of the EU motor vehicles
industry. European automotive firms are leaders in some transitional drive-train and fuel technologies and are
investing in ground-breaking technologies, such as battery-powered hybrid vehicles, electric vehicles and
hydrogen.
Based on available data from large OEMs, manufacturing costs (labour costs, materials and component and
other direct expenses) represent 75-80% of the total operating costs while other production overheads
(warranties, R&D, maintenance and repair, depreciation) are on average 15%. Administrative costs represent
around 5% of the total, while costs of sales (transportation and marketing) account for around 6%. Profit
margins per vehicle are around 3% of the retail price. In the aftermarket sector, interviews with industry
representatives suggested that authorised dealers’ profit margins are less than 2% of turnover while for
independent dealers these are much higher, probably around 10%.
ii
Executive summary
Main findings of the study
Overall picture
The analysis suggests that, in general, the combination of policy options should not be expected to have
sizeable impacts on the competitiveness of most segments of the automotive sector Most firms are not
expected to introduce changes to their organisational structures and incur significant compliance costs.
However, distributors of vehicles and components may need to upgrade their record management processes
and some of the Technical Services– most probably the smaller ones- are expected to face additional costs in
order to meet the enhanced independence criteria envisaged by the combination of policy options.
The cost implications would only be significant in the unlikely scenario that advanced traceability requirements
under policy area A or a physical separation of Technical Services activities under Policy Area C is required.
However, neither of the two approaches is necessary in order to meet the requirements nor there is any
intention to adopt such requirements.
The benefits of the envisaged combination of policy options mainly arise from the reduction in the number of
non-compliant products on the internal market, ensuring a level playing field and allowing firms that produce
compliant products – mainly in the tyres and spare parts sector - to capture market share. The data available
suggest that the existing level of non-compliance varies between 1% and up to 5-10% for certain product
categories.
Effects on cost and price competitiveness
Measures under Policy area A on the traceability of products and responsibilities of economic operators are
already met by large manufacturers as part of current practice. The same seems to apply, in general terms, to
smaller manufacturers (e.g. body builders, trailers and semi-trailers, special purpose vehicles, sport vehicles)
which also consider that the proposed requirements can be met by current practice and with limited
additional administrative work.
Distributors and importers of vehicles and components – authorised or independent – expect some
administrative work to arise from the new obligations under Policy area A – mainly in the form of IT and record
management systems - but they do not consider that the impacts for firms are going to be substantial.
Measures under Policy area B (Responsibilities and cooperation of enforcement authorities) mainly concern
activities carried out by Member State authorities and are not expected to have a direct or indirect impact on
the costs of doing business for firms in the sector.
The proposed provisions under Policy Areas C (Quality and performance of Technical Services) should be
expected to have a direct impact on the costs of operation for Technical Services. Under the dominant
scenario meeting the criteria of technical and financial independence of Technical Services will still require a
certain level of personnel/organisational separation Most, if not all, of the large Technical Services already
meet such requirements and the additional costs will most probably be very limited. For small Technical
Services with limited human resources, the requirements may be more challenging and this may lead some of
them to decide to exit the Technical Services market. However, it has not been possible to collect sufficient
data to assess the extent of the potential impacts with a reasonable degree of certainty.
The proposed measures under policy Area D (two step approach) are not expected to have a direct impact on
the operational costs of firms in the automotive sector. There are concerns that the two step approach will
give rise to uncertainty but the information provided suggests that the probability of Member States taking
action at a national level is rather limited since most products are sold across multiple Member States.
Finally, the proposed provisions under Policy area E (Procedures ensuring conformity of production) are
expected to have a minor impact on costs for manufacturers of vehicles and components, primarily for those
with no established quality management systems. Representatives of the firms in the sector suggest that most
firms do have such systems – in accordance with existing provisions under the Framework Directive - even if
there do not adopt formal ISO quality systems. Firms that are not complying with current requirements should
be expected to incur significant costs if the proposed measures are properly implemented.
iii
Executive summary
Impact on SMEs
The above analysis indicates that the proposed policy measures may have a relatively greater impact on those
sectors in the industry that are dominated by SMEs, such as manufacturers of certain categories of vehicle,
distributors of vehicles and components and also some Technical Services.
However, the expected impacts under Policy Area A (traceability of products and responsibilities of economic
operators) are relatively minor. Certain record management costs will arise for small firms, some of which do
not already have systems in place, but, on the basis of the input provided, the overall costs do not appear to
be disproportionate.
In relation to Policy Area C (Quality and performance of Technical Services), the proposed requirements for
independence are expected to have a greater impact on small Technical Services, since they may not be able
to adopt clear organisational structures and personnel separation without incurring certain costs. While it has
not been possible to assess this in any detail, it is still conceivable that some small Technical Services may
decide that the costs affect the viability of their businesses..
Impact on innovation
The analysis does not indicate that there are measurable and sizeable direct effects from the envisaged
combination of policy options on the innovative activity of firms in the automotive sector.
Under Policy area A, (Traceability of products and responsibilities of economic operators) requirements on
traceability demanding interpretation that would require identification of each individual component would
introduce significant investment costs for new traceability systems, and would probably create demand for
new traceability systems and for more integrated supply chain management systems. However, the envisaged
approach for this policy option does not include the adoption of such systems.
Adopting a rather broad definition of innovation, small size manufacturers (e.g. trailers or special purpose
vehicles) may be encouraged – but not forced - to adopt changes in quality management systems to ensure
compliance with CoP requirements under Policy Area E (Procedures ensuring conformity of production) with
possible long terms benefits in terms of organisation and operational costs.
The independence criteria for Technical Services under Policy Area C (Quality and performance of Technical
Services), may also on some occasions create barriers in the communication and exchange of experience
within Technical Services between those working on type approval related testing and those providing product
design and other consultancy services. However, neither firms nor Technical Services consider that this poses
any real risk to either knowledge creation and innovation.
Of course, at a more general level, improvements in market surveillance, reducing competition from non-
compliant products and ensuring a level playing field provide a supportive environment for innovation.
Effect on international competitiveness
Overall, the key expected impact of the proposed policy options in terms of competitiveness is the possible
contribution to the reduction – if not elimination - of non-compliant products from the market and the
creation of a level playing field. This is particularly relevant for tyre manufacturers and manufacturers of spare
parts and components, the main sectors where issues of non-compliance are common. Based on the results of
the earlier RPA study, a moderate effectiveness of the policy options could lead to a reduction of non-
compliant components by a value of around €650 million, although this is (still no more than 1% of the total
size of the motor vehicles and components market). Nonetheless this could potentially be captured by
compliant firms, inside and outside the EU. Input from industry associations indicates that the potential may
be higher - up to 10% of the market – for tyres and specific categories of spare parts (e.g. brakes), in which
case the potential benefits for compliant firms may be more significant. To the extent that most non-compliant
components come from outside Europe, as is generally claimed by some EU industry representatives, there
may be benefits for the EU industry and also a reduction to the level of imports from outside the EU, at least in
the short term.
At the same time there is no evidence that EU firms may be placed in a disadvantaged position for accessing
third markets. Even if there were to be a strict interpretation requiring individual serial numbers, this would
not have an impact on large OEMs although it could possibly impact smaller manufacturers that do not have
such systems. Since the markets served by smaller firms (e.g. trailers and semi-trailers, special purpose
iv
Executive summary
vehicles) are mainly national, in the short term such competitiveness issues will not apply. There should also
be limited expectations of a possible strengthening of the position of EU firms in third countries on the basis of
improved quality or enhancement of the reputation of the industry. The EU automotive sector already has a
strong reputation in that respect and quality and safety are key selling points. The proposed measures, while
positive, should not be expected to make a significant additional contribution.
Recommendations
As part of the analysis of the expected impacts of the proposed policy measures we have identified certain
areas where specific actions and mitigating measures should be considered.
 It would be appropriate to clarify the type of components that are to be covered by the traceability
requirements and how these requirements can be met. Our understanding is that Commission does not
intend to propose the introduction of individual serial numbers and the analysis suggests that a
requirement of this kind is not justified.
 There is support for the creation of a Technical Services Co-ordination Group that could assist in ensuring
consistency. However, the costs of operation of such a group should be kept to a minimum. If
participation fees are introduced, these should vary depending on the level of activity and the scope of
Technical Services so that they are not disproportionately affected.
 The Commission should examine the possibility of clarifying the circumstances (relevant legislation, issues)
under which a two step approach for safeguard measures may be applied, the relevant procedures and
indicate under which conditions Member States should be expected to notify the Commission and other
Member States before national measures are taken.
 There are not any specific issues arising from the proposed requirements on CoP. The discussions with
industry only point to the need to ensure that CoP is properly checked both for EU manufacturers and for
non-EU manufacturers that place products in the EU market.
v
Tasking for Competitiveness Proofing: Ex-ante evaluation of competitiveness impacts
of identified options for a Commission's policy proposal on the Review of Directive Section
2007/46/EC relating to the approval of motor vehicles
Introduction and methodology 1

This document contains the Final report of the assignment: ‘Tasking for Competitiveness Proofing: Ex-ante
evaluation of competitiveness impacts of identified options for a Commission policy proposal on the Review of
Directive 2001/46/EC relating to the approval of motor vehicles’. This section summarises the aims of the
assignment and presents briefly the methodology and research tools that were used.
1. Introduction
1.1 Resume of Assignment Aims

This study is being carried out in anticipation of a Commission proposal to enhance the legal framework for the
type-approval of motor vehicles by including provisions for market surveillance. The purpose of this study is to
conduct a Competitiveness Proofing analysis of the preferred combination of policy options for the envisaged
Commission proposal. In other words, this study aims to provide an empirical ex-ante evaluation of the
impacts of the proposed options on the competitiveness of the automotive industry and to identify corrective
or mitigating measures if needed in line with Task 3 of the specific contract on Competitiveness Proofing: 'Data
collection and analytical work on the impact of the preferred options on the competitiveness of EU industry'.
The major tasks for this assignment are:
● Assessing the specific sectoral impacts the policy options may have on the competitiveness of the
automotive industry
● Determining whether and to what extent the capacity of the businesses to produce more and/or
higher quality products and services that better meet customers' preferences will be influenced by
the preferred combination of policy options
● Assessing the impact of the policy options on the competitiveness of the European automotive
industry on a global scale, i.e. the impact of the options on the European automotive industry's
market share and comparative advantages on the international market.
● Identify any expected impacts on SME competitiveness and the need for possible mitigation
This Competitiveness Proofing analysis complements the existing Impact Assessment study carried out by RPA
on Enhancing the Implementation of the Internal Market Legislation Relating to Motor Vehicles.
This report provides the basic assessment of impacts on competitiveness based on a qualitative sectoral
analysis with basic quantification when data are available. An additional objective of the study has been to
assess the need for a more advanced analysis to provide a quantification of the impacts identified in this basic
study.
1.2 Methodological framework and research tools

Development of the methodological approach
The methodological approach of the study has followed the competitiveness proofing guidelines of the
3
European Commission .
It has included an analysis of the baseline – description of the structure of the sector, the main trends and the
current practices in the five areas of attention – followed by an identification of the expected impacts, direct
and indirect, of the proposed policy options and the segments of the automotive sector that are likely to be
affected. The analysis has served as the basis for developing more detailed research questions to be addressed
via desk research and interviews with industry representatives.
3
EC (2012), Operational guidance for assessing impacts on sectoral competitiveness within the commission
impact assessment system - a "competitiveness proofing" toolkit for use in impact assessments
1

We have examined whether there are additional mechanisms through which the proposed policy options may
have an impact on any of the competitiveness proofing dimensions and any specific subsectors.
An important consideration was the structure of the automotive sector supply chain and how the industry
structure influences the degree of susceptibility of its various parts to impacts potentially arising from the
policy options. This analysis takes into consideration the enterprise size structures in the different parts of the
supply chain, the corresponding organisational and management structures and whether these affect the
capacity to absorb the additional requirements of the policy options and other considerations such as the
position of specialised producers as against mass market manufacturers.
The following table summarizes the approach followed to assess the impact on competitiveness of each policy
area, the relevant research questions and the research tools and sources that have been used.
Topic Key research questions Research tools and sources
Analysis of  What is the structure of the industry and the supply  Analysis of data sources
baseline chain relationship? What is the role of SMEs? and industry reports
 What is the performance of the sector in relation to  Review of existing studies
other EU sectors and international competition?  Sector Expert interviews
 What are the existing practices and trends in the
industry in relation to the 5 areas?
Analysis of  Which sectors are expected to be affected (directly  Review of existing studies
Impacts on and indirectly)? related to cost structures
competitiveness  Are there any direct or indirect impacts on in sector and impact of
(including SMEs) administrative and substantive compliance costs? cost changes
What is the expected contribution on operational  Analysis of data sources
costs? on profit margins
 Are there any direct and indirect impacts on prices of  Interviews with
intermediates, labour, capital, energy? associations
 Are there any impacts that have a particular effect on  Desk research on
SMEs? experience from other
 Are there any possible impacts on prices for sectors
consumers? Are there impacts on the availability of
products? What is the potential for transfer of costs to
prices of products?
 Are there any possible employment impacts?
Impacts on and indirectly)? on innovation activity
innovation  Are there any direct or indirect incentives/obstacles  Analysis of data sources
created for the introduction/adoption of innovation  Expert interviews
among firms (including process, supply chain or  Desk research on
organisation innovation)? experience from other
 Are there any impacts on the demand for innovative sectors
products from the firms in the sector?
 Are there any expected direct or indirect impacts on
the conduct of R&D activity?
Impacts on and indirectly)?  Analysis of data sources
international  Do the proposed changes pose specific  Expert interviews
competitiveness challenges/costs to EU firms in relation to their non-EU  Desk research on
competitors in terms of access to the EU and third experience from other
country markets? sectors
 Do the proposed policies create any trade barriers?
2

Topic Key research questions Research tools and sources
 Do the proposed changes pose any danger for cross-
border investment flows and relocation of economic
activity?
 Are there any conflicts/issues created from the
proposed policy options with the development of
international standards?
Research tools
Desk research
The study was primarily based on desk research that included:
● A detailed review of key documents including the RPA study that led to the selection of the five policy
4
options, the Fitness Check study and the evaluation of the 2007/46/EC Directive ;
● a review of the provisions of the legislation already adopted for the type approval and market surveillance
of two- or three-wheel vehicles and quadri-cycles (Regulation 168/2013) and agricultural tractors
(Regulation 167/2013);
● documents provided by the Commission services analysing the position concerning Impact of the market
surveillance provisions of the New Legislative Framework on the acquis in the automotive sector;
● studies conducted on behalf of the European Commission examining similar issues in other sectors
including, for example, the Impact assessment for the proposals to align product harmonisation Directives
5
to the NLF which examined similar problem areas in relation to 10 New Approach Directives and also
relied on a public consultation with responses from economic operators, authorities and notified bodies;
● publications of industry associations or private organisations (e.g. consulting groups) that provide
information concerning the structure of various segments of the automotive sector, its competitiveness
and the development in the European and global markets
A detailed list with all documents used is provided in Appendix A.
Data analysis
The analysis has been based on a number of data sources including:
1. Eurostat Structural Business Statistics providing the basic information concerning the structure of the
automotive manufacturing (vehicles and components, tyres), trade (wholesale and retail) and services
segments including:
● volume of sales and production value
● number of enterprises and share of SMEs
● number of employees
● productivity and unit labour costs
Data available at the EU level most often cover the period 2000-2011 although this varies depending on the
sector and the specific variable.
4
RPA (2011), Ex-Post Evaluation and Impact Assessment Study on Enhancing the Implementation of the
Internal Market Legislation Relating to Motor Vehicles
5
EC(2011), NEW LEGISLATIVE FRAMEWORK (NLF) ALIGNMENT PACKAGE - (Implementation of Goods Package)
COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT, COM(2011) 763 final, http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2011:1376:FIN:EN:PDF
3

2. Eurostat EU Science and technology database providing data:
 On Business R&D investment of the automotive sector
 Innovation performance
 Patent activity
3. The EU Industrial R&D Investment Scoreboard that allows to compare the R&D intensity and performance
of the major EU and non-EU manufacturers in the automotive and components sector
4. Eurostat balance of payment statistics providing information on foreign direct investment flows
5. ProdCom Database providing data on the production value, imports and exports at a detailed (8 digit level)
level of disaggregation
6. UN COMTRADE database that provides a high level of disaggregation and is necessary for the calculation of
indicators like that of Revealed Comparative Advantage (RCA) and Relative Trade balance.
7. UNCTAD statistics also provide data on trade at a disaggregated level of analysis
8. OECD Stan database on import content of exports, intermediates import ratios, R&D intensity, productive
and unit labour costs
In addition, for the analysis of the sector we made use of data from the Orbis Database of Bureu Van Dijk and
6
data from market reports from the Euromonitor database
Interview programme
The limited time available did not allow for a comprehensive interview programme that would include
individual firms. As an initial basic analysis the study has been based on interviews with representatives of
main industry associations directly or indirectly affected by the proposed policy measures. These included:
1. ACEA : motor vehicle manufacturers association representing OEMs
2. ESCA : Association of small volume vehicle manufacturers
3. CLEPA: manufacturers of components and parts including aftermarket
4. ETRMA : tyres manufacturers
5. CLCCR : Body and trailer building industry association
6. CECRA: European Council for motor trades and repairs
7. EAIVT: European association of independent vehicle traders
8. FIGIEFA : independent aftermarket
In addition, we invited a total of 12 Technical Services to participate in the study and provide their feedback in
relation to the possible impact of the proposed policy measures. Unfortunately, only 2 accepted our invitation
and as a result, although this input provided some insights, it cannot be considered to be representative of the
views of the Technical Services’ population.
The interviews with industry representatives and experts were tailored to the specifics of the sector or the
area of expertise. However, as a general guideline we asked for input in relation to:
● trends in the industry in relation to the five problem areas
● the extent that the proposed policy areas could be expected to have any impacts on:
6
The data sources were accessed via public libraries.
4

- costs of operation and the utilisation of the key factors of production
- possible indirect economic impacts
- specific issues that may arise for small size firms
- the possibility for passing-on costs to prices in the sector
- of the effects on innovation or development of innovative technologies for the firms in the sector
- relevant factors relating to the adoption of innovation
- possible impact on sourcing policies and production location
- possible impact on the competitiveness and market access in relation to non-EU competitors
- possible impact on attractiveness of the EU and on foreign direct investment
- relevant regulatory and other developments in third countries
In all cases of impacts, we asked experts to comment on:
● the relevance of the proposed policy options for the potential positive or negative impacts already
identified and for other potential impacts
● the expected size of the impact in relation to the cost structure of the specific sector (in qualitative terms
and if possible in relation to operation costs)
● the expected timing and duration of the impact
● the key factors that can influence the extent of the proposed impact
1.3 - Structure of the Report

The Draft Final report is structured as follows:
● Section 1: Introduction and methodological framework – introduction and outline of the report structure,
the context in which the work was undertaken, the project’s objectives, the methodological approach
developed and the intended deliverables.
● Section 2: Baseline description of the automotive industry – Description of the sectors possibly to be
affected by the Commission’s initiative, the value chain of the automotive industry, the current structure
of the automotive industry, the current level of competitiveness of the EU automotive industry at global
level, trade and other relevant statistics.
● Section 3: Assessment of impacts – qualitative assessment of the direct and indirect impact of each
preferred policy option on cost structure and price effects, capacity to innovate and the competitiveness
of the EU automotive industry and the affected sub-sector on a global scale. When possible a quantitative
analysis of impacts (cost/price impacts, impacts on R&D and innovation investment) will be provided.
● Section 4 – Proposal for advanced study – formulation of a proposal for an advanced study indicating the
areas where further research is necessary and indicating which research tools could be used to obtain
more data with a view to confirming claims and conclusions or to making reliable estimates of the
quantity involved.
● Section 5: Conclusions and recommendations – summary of the impacts of each of the preferred policy
options on the competitiveness of the EU automotive industry from the perspective of the cost of doing
business, the capacity to innovate, and international market shares. Formulation of recommendations
and possible mitigating measures where appropriate.
Appendices - supporting documentation
 Appendix A – Relevant PRODCOM and UNCTAD product Codes
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 Appendix B - References
 Appendix C – Comparison of relevant provisions of the New Legislative Framework with the Regulation
168/2013 on the type approval and market surveillance of motorcycles and quadri-cycles
6
Background analysis 2
The following section provides background information on the economic situation of the European Automotive
Industry and the initiatives taken at EU-level to enhance its competitiveness, and provides an analysis of the
automotive sector.
2. Background and analysis of automotive sector
2.1 - Brief description of the policy context

The EU's technical harmonisation legislation for motor vehicles, their components and systems has been
progressively introduced since 1970, under the framework provided by Directive 70/156/EEC. Over the last 40
years, the nature of the regime has evolved from being a system designed to allow free trade of vehicle
components between Member States, to a system based on compulsory whole vehicle type-approval (WVTA)
for most categories of motor vehicles. This has resulted in the original framework directive being replaced by
Directive 2007/46/EC (WVTA Framework Directive) and subsidiary legislation. The EU motor vehicle type-
approval legislation based on the WVTA Directive specifies safety and environmental protection requirements
that new motor vehicles need to fulfil to be type-approved and to be allowed on the European Union market.
The requirements introduced in the WVTA Directive have increased the level of safety, environmental
7
protection and energy performance of motor vehicles . As was remarked in the Motor Vehicle Type-Approval
8
Fitness Check study , this legal framework makes a positive contribution to the development of innovation,
pushing industry to meet more demanding standards in the safety and environmental areas. The EU motor
vehicle legislation in place today is providing a coherent and robust framework fully adapted to the principles
of better regulation and simplification, and providing an adequate response to the societal demands for
protecting the citizens and the environment. There has also been greater alignment with the international
regulatory framework established by the United Nations’ Economic Commission for Europe (UNECE).
However, unlike other areas of Internal Market regulation, there have not been provisions for market
surveillance of Type Approval legislation in the past and there may still be room for improvement as far as the
implementation and enforcement of existing provisions are concerned. In May 2010, a report on a new
9
strategy for the single market recommended that in order to reap the full benefits of the single market for
goods, it is necessary that the New Legislative Framework (NLF) for internal goods adopted in 2008 be fully
implemented, in particular with regard to the mutual recognition principle and market surveillance, and also
extended to other products.
In response to the recommendation, the European Commission set out to explore appropriate ways and
means to enhance the implementation and enforcement of the legislative framework for the free movement
of motor vehicles, also with the possibility of incorporating key elements of the New Legislative Framework for
10
the marketing of products in the Single Market . A public consultation involving stakeholders in the EU
11
automotive industry was also launched in 2010 to assess to which extent this could be done, while taking
into account the solutions offered by the NLF for the automotive industry with a view to contributing at
sectoral level to the new strategy for the single market.
7
E.g. Reg. 1060/2008, Reg. 595/2009, Reg. 1230/2010
8
Fitness Check of the Legal Framework for the Type-Approval of Motor Vehicles, CSES, March 2013
9
A New Strategy for the Single Market at the service of Europe’s economy and society, Mario Monti, May 2010
10
Decision 768/2008/EC
11
EC (2010), Consultation on enhancing the implementation of the internal market for motor vehicles,
http://ec.europa.eu/enterprise/sectors/automotive/documents/consultations/2010-internal-
market/index_en.htm
7
12
Following this public consultation, an Impact Assessment Roadmap was published in 2010 . The Roadmap
clearly points out that market surveillance in the automotive sector needs to be addressed to prevent the
occurrence of internal market failures arising from non-compliant or unsafe automotive products on the
market and thus to guarantee full and rigorous enforcement of the framework legislation in the automotive
sector. In other words technical harmonisation in the automotive sector that has up until now focused on ex-
ante controls through type approval and conformity of production also needs to include market surveillance,
to achieve a more competitive and sustainable European automotive industry as a whole.
The Impact Assessment Roadmap identified five specific areas of attention for which options for possible
initiatives should be considered to address the shortcomings in implementing the internal market legislation
for the automotive industry.
1. Traceability of products and responsibilities of economic operators:
2. Responsibilities and cooperation of enforcement authorities;
3. Quality of type approval and conformity of production tasks carried out by Technical Services;
4. Post safeguard measures and recalls; and
5. Procedures for ensuring conformity of production.
13
The five areas were further analysed by means of an Impact Assessment study in which policy options
addressing these areas have been defined and compared. The policy options considered to address the five
problem areas were as follows:
Option 1: Baseline scenario
Option 2: Self-regulatory initiatives (awareness campaigns and/or voluntary Agreements);
Option 3: Co-regulatory initiatives (joint actions by the Commission and the Member States);
Option 4: Regulatory initiatives (amending the existing technical harmonisation legislation relating to motor
vehicles).
Table 2.1 summarises the policy options considered to be more appropriate on the basis of the analysis of the
RPA consultants.
Table 2.1 – Policy options selected by area of attention
Problem area Policy option selected
A: traceability of A3 – Regulatory initiative
products and Amend 2007/46/EC Directive to incorporate elements of the NLF to improve the
responsibilities of enforcement of the automotive regulatory framework including:
economic operators - Clarification of Responsibilities of economic operators, importers and distributors
in alignment with the provisions of the NLF.
- Product Traceability: Manufacturers will be required to ensure that their products
bear a type, batch or serial number or other element allowing their identification.
- Company Traceability: Economic operators will be required to retain full details of
all businesses to which they have supplied, or which have supplied them with,
vehicles and/or automotive devices.
B responsibilities and B4 - Regulatory initiative
cooperation of Amend 2007/46/EC to Clarify the roles and responsibilities of enforcement
12
Impact Assessment Roadmap: Enhancing the implementation of the internal market for motor vehicles,
European Commission (July 2011)
13
Impact Assessment Study on Enhancing the Implementation of the Internal Market Legislation Relating to
Motor Vehicles, RPA (February 2012)
8
Problem area Policy option selected
enforcement authorities in line with the NLF. Enhance information exchange and co-operation
authorities amongst national authorities by amending technical harmonisation legislation.
C: quality of type C3 – Regulatory initiative
approval and Strengthen requirements for Technical Services in order to be entitled to perform
conformity of type-approval testing and verification of CoP and to strengthen the technical and
production tasks financial independence of TS
carried out by
Technical Services
14
D: post safeguard D3 – Regulatory initiative
measures and recalls
Introducing a new two-step approach for safeguard measures in line with the
principles of the NLF Decision 768/2008/EC.
E: procedures for E3 - Regulatory initiative
ensuring conformity of Amend Directive 2007/46/EC through the application of the principles and
production provisions of the NLF related to the verification of conformity during the production
stage.
This study examines the Competitiveness impacts of the selected policy option in the five areas of attention.
The first step includes an analysis of the EU automotive market, the structure of automotive manufacturing
and aftermarket segments and the relationships within the supply chain. It considers the competitiveness of
the EU automotive sector against the main competitors and the future challenges.
2.2 - Analysis of the automotive sector structure

In this section we provide a description of the automotive sector, identifying the subsectors to be examined in
the study and focusing on the key indicators to be examined as part of the competitiveness proofing exercise.
The competitiveness of the affected industry is reflected in a number of variables. In this section, we present
statistics on the following dimensions of competitiveness:
● Market size;
● Production value and quantity;
● Employment;
● Number of enterprises;
● Labour productivity;
● Innovation capacity.
This analysis will be further elaborated as part of the data collection and desk research in Phase 2 of the study.
Definition of the industry
The automotive sector can be split into two main groups, the manufacturers of the various types of motor
vehicles and the relevant parts and components – including tyres - and the aftermarket segment that includes
manufacturers of spare parts and accessories and garage equipment, providers of repair services and
wholesale and retail traders of motor vehicles. One should also add the providers of various types of
specialised support services to the motor vehicles manufacturers including the designated Technical Services –
14
The RPA study concluded that option D1 – Do nothing is the most appropriate for this problem area.
However, according to the terms of reference we are asked to consider the possible impacts of a regulatory
initiative that will introduce a two step approach.
9
around 250 in total - and specialised technical consultants offering engineering services to the manufacturing
sector.
15
The relevant datasets have a high level of disaggregation in relation to production and sale volumes
16
(PRODCOM) and of trade (UN COMTRADE) but less so in relation to manufacturing activities . Furthermore,
certain segments of the automotive aftermarket (such as garage equipment manufacturers, certification
organisation/ inspections centres and producers of specialised software) are included under more generic
NACE codes.
Table 2.2- Motor vehicles sector definition
Activity description NACE ProdCom product codes UN COMTRADE
Manufacture of motor 29
vehicles, trailers and
semi-trailers
Manufacture of motor 29.1 29101100;29101200;29101300; 8702; 8703; 8704;
vehicles 29102100; 29102230; 29102250; 8705
29102310; 29102330; 29102340;
29102353; 29102355; 29102400
29103000; 29104110; 29104130;
29104140; 29104200; 29104300;
29104400; 29105100; 29105200;
29105930; 29105950; 29105990
Manufacture of bodies 29.2 29201030; 29201050; 29202100; 8707
(coachwork) for motor 29202292; 29202298; 29202300;
vehicles; manufacture of 29203030;29203050; 29203070;
trailers and semi-trailers 29203090
Manufacture of parts and 29.3
accessories for motor
vehicles
Manufacture of electrical 29.31 29311000 ; 29312130; 29312150; 8708; 851240;
and electronic equipment 29312170 ; 29312230 ;29312250; 8511 ; 8512
for motor vehicles 29312270 ; 29312310; 29312330;
29312350 ; 29312370; 29313030
29313080
Manufacture of other 29.32 29321000; 29322030 ; 29322050; 870810;870829;
parts and accessories for 29322090 ;29323010; 29323020; 870840;870850;
motor vehicles 29323033 ; 29323036; 29323040; 870891; 870894
29323050 ; 29323061; 29323063 870899; 870892
29323065; 29323067; 29323090 870880;870821;
870870;870893;
870831 870839-
870860 ; 700910
Manufacture of rubber 22.11 22111100; 22111355 ;22111357; 4011; 4012
tyres and tubes; 22112030; 22112050
retreading and rebuilding
of rubber tyres
Wholesale and retail 45
trade and repair of motor
15
Eurostat Structural Business statistics and PRODCOM and the UN COMTRADE
16
The respective labels for PRODCOM and UNTRADE are provided in Appendix A.
10
Activity description NACE ProdCom product codes UN COMTRADE
vehicles and motorcycle
Sale of motor vehicles 45.1
Maintenance and repair 45.2
of motor vehicles
Sale of motor vehicle 45.3
parts and accessories
Wholesale trade of motor 45.31
vehicle parts and
accessories
Retail trade of motor 45.32
vehicle parts and
accessories
Garage equipment n.a.
manufacturers
Certification organisation/ Part of 71.12
inspections centres and/or
17
71.20
software companies, Part of
18
publishers and agency 62.01
working the automotive
branch
Source: Eurostat, UNCOMTRADE
For all above sectors we examined the possible impact, direct or indirect, of the proposed policy measures.
Description of the automotive supply chain structure
Before presenting detailed data on the different segments of the automotive industry it is important to
provide a description of the structure of the supply chain in the automotive sector and the existing inter-
relations.
The automotive sector has a ‘tiered’ supply chain structure (see also figure below).
17
71.12: Engineering activities and related technical consultancy, 71.20 Technical testing and analysis 7120
18
62.01 Computer programming activities
11
Chart 2.1: Overview of automotive industry value chain
The first level includes the large scale multinational Original Equipment Manufacturers (OEMs). There were 16
major car, truck and bus original equipment manufacturers in Europe operating in 2012 and 177 vehicle
19
assembly and engine production plants, in 16 Member States . The main car producers present in the
European market are Volkswagen, PSA, Ford, Renault, GM, Fiat, Daimler and BMW, Nissan, Toyota, Honda,
Hyundai. The six main producers for the European commercial vehicle market are DaimlerChrysler, MAN,
Volvo, DAF, Scania, and Iveco. Smaller size firms can only be found in certain niche segments of the market
including sports cars, motor homes, trailers and semi-trailers and also special purpose vehicles like taxis and
20
ambulances . Manufacturers in these groups – excluding sports cars – most often purchase incomplete
vehicles from the large OEMs which they then adopt to the specific needs of their customers.
Upstream from the small number of global car manufacturers (OEMs) are the so-called Tier 1 suppliers. These
firms typically supply some of the largest components or sub-systems for the cars (e.g. powertrain systems,
suspension assemblies, transmission and steering systems). Tier 1 firms are primarily large size firms with
multiple production plants and in many cases they are also active in other sectors (electronics, mechanical and
electrical engineering, information technology, steel, chemicals, plastics, metals and rubber, etc). SMEs can
again be found in certain niche segments of the automotive market at this tier (e.g. body builders). Tier 1
automotive suppliers are increasingly producing complex components or "modules" instead of simple spare
parts. They often develop components and share R&D activity with the OEMs. There has been an increasing
level of outsourced components and nowadays, according to the European Association of Automotive
Suppliers (CLEPA), around 75% of every vehicle is made by automotive suppliers. Tier-1 suppliers typically have
a production plant close to the car manufacturers to support Just-In-Time type production processes (this is
19
ACEA (2013), Automobile assembly & engine production plants in Europe,
http://www.acea.be/news/news_detail/automobile_assembly_engine_production_plants_in_europe/
20
Most often special purpose vehicles are conversions of complete vehicles purchased from OEMs.
12
also determined by the balance between transport and production costs). While there is an increasing trend
for disintegration of the supply chain, OEMs maintain control of the Tier 1 suppliers or develop their own
proprietary hardware and software (e.g. powertrain management systems).
Tier 2 suppliers typically provide components to the Tier 1 suppliers (e.g. pump units, electric motors or
bearing assemblies) A significant proportion of SMEs are generally found in Tier 2. Tier 3 (4 etc.) suppliers
provide the Tier 2 suppliers with anything from brackets and seals through to machined components etc. Raw
material suppliers are also considered as Tier 3 suppliers although in many cases they supply directly to OEMs,
representing an important share of the total spending of OEMs. In contrast to Tier 1 suppliers, suppliers
further upstream do not have direct linkages with the OEMs and may be based anywhere in the world.
According to CLEPA, in total the EU automotive supply sector (Tiers 1, 2 and 3) includes around 3,000
companies - around 2,500 of which are small or medium-sized enterprises.
Table 2.3 – Main types of motor vehicle components
Components sub-division Components
Engine Parts Pistons, piston rings, fuel delivery systems, engine valves, carburettors
(largest component)
Electrical Parts Starter motors, spark plugs, electric ignition systems (EIS), generators,
distributors, voltage regulators, ignition coils, flywheel magnetos
Drive Transmission and Steering systems, gears, axles, wheels, clutches
Steering Parts
Suspension and Braking Parts Leaf springs, shock absorbers, brakes, brake assemblies, brake lining
Equipment Switches, electric horns, headlights, halogen bulbs, wiper motors, dashboard
instruments, other panel instruments
Others Sheet metal parts, pressure die castings, plastic moulded components, fan
belts, hydraulic pneumatic equipment
Tyres manufacturers are also part of the supply chain and could be considered as Tier 1 suppliers. There are 10
global tyre companies that represent close to 66% of the total tyre production. 3 of these firms have their
headquarters in the EU and operate 82 manufacturing plants inside and outside Europe that produced close to
4.5 billion tyres in 2010, representing 26.5% of the world tyre production. According to the European Tyre and
Rubber Manufacturers Association, from the total global sales of tyres of €150 billion in 2010, 25%
represented new motor vehicles tyres and around 75% replacement tyres.
Downstream from the OEMs are logistics providers that distribute finished vehicles to storage compounds and
vehicle distribution hubs located around the world. They deliver to the franchised authorised car dealers and
to independent dealers of motor vehicles and parts and components. They are part of the automotive
aftermarket that also includes the providers of maintenance and repair services and also vehicle repair
companies, garage equipment manufacturers and engine remanufacturers and rebuilders.
Vehicles and components manufacturers
Market size
The EU represents the largest single market for motor vehicles in the world, representing 17.5% of the total
global sales in 2012, 20% of the passenger cars market and 8% of the market for commercial vehicles.
However, the share of the EU market in world sales has decreased significantly since 2005 – when it
represented more than 26% of the total global sales. This is a result of the financial crisis that has affected the
demand for motor vehicles in the EU along with the soaring demand in the markets of developing countries in
Asia and Latin America which more than doubled in the 2005-2012 period and which has been met to a major
extent by the developing domestic suppliers in those markets.
13
Table 2.4 – Evolution of the motor vehicles market in EU27 and the world (number of units in thousands)
2005 2006 2007 2008 2009 2010 2011 2012
21
Total EU27 18,122 18,426 18,773 17,283 16,173 15,621 15,615 14,311
22
+EFTA
World 65,431 68,021 71,192 68,076 65,415 74,628 77,926 81,739
Passenger EU27+EFTA 15,551 15,882 16,064 14,823 14,487 13,792 13,601 12,537
cars World 44,755 47,495 50,325 49,481 48,996 55,118 57,242 60,486
Commercia EU27+EFTA 2,570 2,543 2,708 2,459 1,686 1,829 2,014 1,773
l vehicles World 20,676 20,526 20,866 18,594 16,418 19,510 20,684 21,252
Source: OICA
Similar data on the market size of parts and components are not available. However, on the basis of the
PRODCOM database and the correspondence with the relevant NACE codes we can estimate the size of the
total consumption in the EU. The components market reached a total size of €167.7 billion in 2011 while
rubber and tyres was close to €20 billion. EU production – including non-EU manufacturers with established
production facilities inside the EU – exceeds consumption in the motor vehicles, trailers and semi-trailers and
the non-electrical and electronic segment of the parts and accessories market. In all these sectors, extra-EU27
exports are in the range of 15% (for trailers) to 30% (motor vehicles) of production value. Imports are higher
than the exports only in the electrical and electronic equipment and the tyres subsectors.
Table 2.5 – EU-27 market size for different segments of the automotive manufacturing sector in 2011 (value
sold in billion Euros)
Exports Imports Production Consumption
Manufacture of motor vehicles –all categories
110.0 29.6 390.0 309.6
(291)
Manufacture of bodies (coachwork) for motor
4.0 0.8 25.8 22.7
vehicles; manufacture of trailers and semi-trailers
(292)
Manufacture of parts and accessories for motor
37.2 20.8 184.2 167.7
vehicles (293)
Manufacture of electrical and electronic
2.9 5.7 20.7 23.5
equipment for motor vehicles (2931)
Manufacture of other parts and accessories for
34.3 15.1 163.6 144.3
motor vehicles (2932)
Manufacture of rubber tyres and tubes;
4.2 5.5 18.1 19.4
retreading and rebuilding of rubber tyres (2211)
Total 155.4 56.7 618.1 519.4
Source: Eurostat Structural Business Statistics
The chart below shows the evolution of production and consumption for the four main sectors over the period
2003-2011 on the basis of PRODCOM data. In the case of tyres data from ETRMA show an increasing gap
23
between imports and exports in the case of tyres for passenger and light vehicles .
21
Data available do not include Croatia
22
Norway, Switzerland and Iceland.
23
http://www.etrma.org/uploads/documents/20121119%20ETRMA%20Statistics%202012.pdf
14
Chart 2.2 – Evolution of total production and consumption of main groups of products in the automotive
sector in the EU (values in billion Euro)
450.0
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Tyres Production Tyres Consumption

Motor vehicles Production Motor vehicles Consumption
Bodies; Trailers and semi-trailers Production Bodies; Trailers and semi-trailers Consumption
Parts and components Production Parts and components Consumption
Source: PRODCOM
24
Data from industry provide additional information on the production of motor vehicles in Europe. A total of
16.2 million motor vehicles (passenger cars, vans, trucks and buses) were produced in Europe, representing
19% of the total motor vehicles production worldwide. In the passenger car market segment European
manufacturers represented. The EU has a smaller share in the commercial vehicles segment (vans, trucks,
buses and coaches), being the third larger producer (1.8 million units in 2012) with a share of 8.5% of total
global production. NAFTA countries (mainly USA) - in the case of light commercial vehicles- and China and the
other BRIC countries in the case of heavy trucks and buses - are the main producers (see chart). The financial
crisis has also led to important production cutbacks and capacity utilisation fell to 65% at the beginning of
25
2009 . The total production of motor vehicles decreased by more than 30% of the pre-2007 levels in 2009 and
has only partly recovered since.
24
International Organization of Motor Vehicle Manufacturers production statistics,
http://oica.net/category/production-statistics/
25
ACEA (n.d.), GLOBAL INSIGHT: THE CRISIS IS DEVASTATING,
http://www.acea.be/index.php/news/news_detail/global_insight_the_crisis_is_devastating/
15
Table 2.6 – Evolution of production of motor vehicles in the EU27 (number of units in millions)
26 27
Type Region 2001 2005 2007 2008 2009 2010 2011 2012
Total EU27 17.2 20.8 19.7 18.4 15.3 17.1 17.5 16.2
World 56.3 66.5 73.2 70.5 61.8 77.7 79.9 84.1
Passenger EU27 14.9 15.8 17.1 16.0 14.0 15.3 15.7 14.6
cars World 39.9 46.9 53.2 52.7 14.0 19.4 59.9 63.1
Commercial EU27 2.3 3.0 2.6 2.4 1.3 1.8 2.0 1.8
28
vehicles World 16.5 19.6 20.1 17.8 47.8 58.3 20.1 21.1
Source: OICA
Chart 2.3 – Share of production of EU and other main competitors in motor vehicles market (2005 and 2012)
Source: OICA (2012)

Industry structure
The Table overleaf summarises Eurostat data on basic characteristics of the automotive manufacturing
subsectors. In terms of turnover, the automotive manufacturing sector – manufacturers of vehicles, bodies,
trailers and components – reached a total of €740 billion in 2010 with a value added of around €140 billion,
representing about 8% of total EU manufacturing. Motor vehicles manufacturers had a total turnover of €526
29
billion in 2010 and employed around 1 million people, the parts and components sector occupied 1.1 million
with a turnover of around €190 billion while the bodies and trailers sub-sector occupied around 175,000
people with a turnover of €25 billion.
Data on the number of enterprises from Eurostat refer to individual legal entities rather than business groups.
This is particularly important for the automotive sector, where the few (16) large OEMs control a large number
26
Data for EU15
27
Data for EU25
28
Including vans, trucks, buses, coaches
29
There is clear discrepancy with the estimated 3 million employees indicated by CLEPA. We consider that this
a reflection of that fact that CLEPA members
16
of enterprises operating in different countries. To a certain extent this also applies to Tier 1 component
suppliers. Still, the data illustrate the differences in the structure of the various sub-sectors examined.
Motor vehicle enterprises are predominantly large firms in comparison to body builders and trailer
manufacturers where small size enterprises predominate with an average of 24 employees and €3.6 million
average annual turnover. The parts and components sector – that includes all Tiers – has an average size of
close to 100 employees. The differences in size also show important differences in terms of apparent labour
productivity levels where motor vehicle manufacturers appear to be twice as productive as the manufacturers
of parts and accessories.
Table 2.7 – Basic figures of the automotive manufacturing sector in the EU (data for 2010 or most recent
year available)
Manufacture Manufacturer of Manufacture of Tyres
of motor bodies, trailers parts and
vehicles and semitrailers accessories
Number of individual enterprises 2,260 7,670 10,596 1,747
Turnover (billion €s) 526.0 24.9 188.8 38.3
Production value (billion €s) 488.0 27.0 182.0 n.d.
Value added (billion €s) 90.0 6.6 46.0 n.d.
Persons employed 1,016,438 170,000 1,036,259 125,000
Average firm size 449.8 24.3 97.8 73
(no. of employees)
Average firm turnover (million €s) 232.7 3.6 17.8
30
Apparent labour productivity 90 41.4 45.5 70
Number of SMEs 1895 7,002 9,569 1,695
- share in total in sector 92% 99% 91% 97%
- share of turnover 1.1% 64.5% 24.8% 20%
Source: Eurostat
Concerning the share of SMEs, the Eurostat data are again possibly misleading given that many SMEs are
controlled by the large OEMs or TIER 1 suppliers. Still, the very small share of SMEs in the total turnover and
employment of the motor vehicles segment is a clear indication of their minor role in this segment. In
comparison, SMEs have a more prominent role in the case of body-builders, trailers and semi-trailers where
they represent more than 64% of the total turnover and 75% of employment.
Table 2.8 - Share of employment in the automotive sector by company size class, EU-27, 2010
Total 0-9 10-19 20-49 50-249 250 or more
Total Manufacturing 300,000 14.3% 8.6% 11.9% 25.3% 39.9%
Rubber products 3,321 9.9% 6.8% 19.2% 64.1%
Motor vehicles 10,026 0.4% 0.2% 0.5% 1.7% 97.2%

Bodies, trailers and 1,592 10.4% 9.0% 17.9% 36.1% 25.9%
semi-trailers
Parts and accessories 10,100 1.6% 1.4% 3.5% 18.4% 75.0%
Source: Eurostat – Structural business statistics
30
Gross value added/person employed - €s
17
Concentration of production activity within the EU
Examining the distribution of the production of motor vehicles and components at the Member State level,
Germany is by far the greatest producer (35% of total production in 2010) with a total of 47 production plants.
It is followed by Spain (14%) and France (13%). Other important producers include the UK (8% of production
volume in 32 plants), the Czech Republic, Poland and Italy. Germany, France, the UK, Italy, Spain and Sweden
together accounted for 93% of motor vehicle production in terms of value added with half of this gross value
added coming from Germany.
The same countries are also the main producers of parts and components (see table 2.7) although countries
like Slovakia, Slovenia, Hungary and Romania are gradually assuming a higher share of total production.
Table 2.9 - Volume of production of motor vehicles in the EU in 2010 – number of motor vehicles and
number of production plants by Member State
Number of motor Total Number of
vehicles produced production plants
GERMANY 5,905,985 47
SPAIN 2,387,900 15
FRANCE 2,227,374 38
UNITED KINGDOM 1,393,463 32
CZECH REPUBLIC 1,076,385 11
POLAND 869,376 16
ITALY 857,359 20
SLOVAKIA 556,941 3
ROMANIA 350,912 1
BELGIUM 338,290 9
SWEDEN 217,084 15
SLOVENIA 205,711 1
HUNGARY 167,890 6
PORTUGAL 158,723 5
NETHERLANDS 115,487 9
AUSTRIA 104,814 6
FINLAND 6,500 2
Source: ACEA
Concerning the segment of trailers and semi-trailers, it is again more or less the same countries that dominate
the market (Germany, France, UK, Italy, Spain and Netherlands), representing 80% of the annual turnover in
the sector, 75% of employment and around 55% of the enterprises (see Table 2.10).
18
Table 2.10 - Production of motor vehicles, bodies (coachwork) and trailers and components in the EU27 in
2010 – number of individual legal units (enterprises), production value and number of employees (main
producing countries in bold)
Manufacture of motor vehicles Manufacturers of bodies, Manufacture of parts and
trailers and semitrailers accessories for motor vehicles
Enterprises
Enterprises
Enterprises
employed
employed
employed
Turnover
Turnover
Turnover
(million)
persons
persons
persons
EU27 2,260 526,000 1,016,438 7,680 25,300 161,192 10,596 188,848 1,036,259
BE 38 10,722 18,955 346 1,099.5 4,978 156 5,041 11,032
BG 0 0 0 25 7.3 408 85 393.9 9,756
CZ 120 12,431 33,291 287 226.6 3,252 984 15,027.7 103,822
DK 17 79 336 77 236.0 1,290 75 639.7 2,773
DE 284 252,205 464,357 1,318 7,869.4 40,148 1,323 65,798.8 244,990
EE 4 : : 24 : : 21 99.8 2,316
IE 4 28 154 26 43.6 304 18 480.5 2,108
EL 40 63 1,130 150 119.1 1,236 158 97.4 1,804
ES 168 34,476 63,377 851 1,416.5 10,796 1,017 15,217.6 66,736
FR 189 78,969 137,554 1,161 4,056.7 25,157 639 16,056.1 61,906
IT 105 31,680 68,424 618 2,286.6 15,530 1,531 15,190.1 91,778
CY 0 0 0 25 8.3 97 59 5.9 117
LT 4 : 105 7 : 224 18 54.4 660
LT 5 5 86 13 90.5 506 13 12.0 703
LU 7 126 492 7 81.2 409 4 - -
HU 51 6,644 11,080 99 228.0 2,371 335 6,859.0 51,702
NL 126 3,568 9,183 474 1,420.1 7,846 147 1,088.8 5,046
AT 26 7,727 13,444 199 587.3 3,570 81 3,512.0 11,972
PL 107 12,137 32,096 299 639.3 9,369 980 11,743.7 107,251
PT 26 2,199 5,410 199 195.3 2,818 304 3,562.3 21,499
RO 24 2,869 17,472 73 57.6 1,632 332 4,840.5 97,487
SL 14 1,300 3,009 35 249.4 1,495 92 1,034.3 8,516
SK 28 8,146 12,318 45 155.4 1,473 131 5,069.5 37,291
FI 26 527 2,081 150 455.4 3,107 94 205.7 1,381
SE 180 17,424 44,926 272 694.1 4,042 615 3,828.8 17,488
UK 649 40,826 77,075 790 2,926.1 19,134 1,357 10,245.4 76,125
Source: Eurostat Structural Business Statistics
The industry has been plagued by worldwide overcapacity and a number of manufacturers have been forced
to close plants in Europe. However, certain manufacturers have also opened new manufacturing sites in the
EU – mainly in Central and Eastern Europe - taking advantage of the favourable cost situation in the newer
Member States and their geographic proximity to Western European markets.
19
Automotive production in the newer Member States has increased significantly in the last few years and
represented 14% of total EU production value in 2010, up from 12.8% in 2006. These countries have attracted
high levels of foreign direct investment (FDI) in the recent years due to their close proximity to Western
Europe, lower labour costs and skilled workforce. Foreign Direct Investment (FDI) in the motor vehicles sector
represented around 15% of the total FDI stock of the manufacturing sectors for the countries of Central and
31
Eastern Europe (RO, CZ, HU, PL, SK, SL) in 2010 . While the majority of the investments originate from
manufacturers of European origin, overseas investors have also been attracted with new plants in the Czech
Republic (Huyndai), Hungary (Suzuki) and Poland (Toyota). As component suppliers tend to follow vehicle
manufacturers into a region this has also led to the development of industrial clusters, in particular in Southern
Poland, the Eastern Czech Republic, Western Slovakia and the North of Hungary.
The market for auto parts and equipment is highly fragmented with the top four players (Affinia, Valeo, Delphi
and Federal Morgul) accounting for less than 2% of aggregate global revenues. On the other hand, the top four
players in the tire and rubber market, namely, Bridgestone, Michelin, Goodyear and Continental, hold more
32
than 64% of global revenues .
Automotive aftermarket: size and industry structure
The motor vehicle sector is completed by the automotive aftermarket. According to data from the
independent aftermarket association – FIGIEFA – the aftermarket includes 765,000 companies with around 4
million employees and a total turnover in 2010 of around €890 million. It includes authorised and independent
manufacturers of spare parts and the relevant traders, the providers of maintenance and repair services–
around one third of which are linked to specific OEMs, the others being independent – and also vehicle repair
companies, garage equipment manufacturers and engine remanufacturers and rebuilders. Furthermore,
FIGIEFA data refer to 56 certification organisations to which we should also add the 250 providers of Technical
Services, some of which are parts of large certification organisations, other being public sector labs.
Table 2.11 – Main data on the aftermarket sector (2010)
Number of Employees Turnover
enterprises ( million €s)
Manufacturers of spare parts and 10,525 244,518 37,172
33
accessories for motor vehicles
Garage equipment manufacturers 178 22,826 3,423
Trade of motor vehicle parts and 103,468 659,769 141,097
accessories
Maintenance and repair of motor vehicles 407,389 1,448,204 122,055
(garages)
Sale of motor vehicles (new + used) 195,125 1,518,702 559,957
Certification organisations 56 67,200 11,200
Technical Services Ca. 250
Total 764,914 4,054,525 890,469
Source: FIGIEFA
Adopting a broader classification for the aftermarket, the components manufacturers association (CLEPA)
refers to total sales of the automotive spare parts’ aftermarket as being around €100 million. A more
important aspect is that the aftermarket structure is split into two main distribution channels: Original
Equipment Sales and the Independent Aftermarket. These are shared among Original Equipment
Manufacturers, Parts Manufacturers and Independent Operators. Parts manufacturers often serve both parts
31
Eurostat Balance of payments statistics
32
IMAP (2010), Automotive and Components Global Report
33
Includes only manufacturers of spare parts
20
of the market, producing components under the OEMs’ brands but also selling in the independent market.
Recent analysis of the automotive parts aftermarket suggests that original equipment sales and the authorised
repair providers dominate (>75%) the market related for newer vehicles (<4 years). The 4-8 year segment is
shared relatively equally while parts and services for older vehicles are dominated by the independent
34
aftermarket (85%) .
SMEs dominate the aftermarket segment with more than 97% of the total number of firms and an average
firms size of less than 10 persons employed (more than 90% are firms with less than 10 persons employed).
Productivity levels are also lower than those in the manufacturing segments of the automotive sector.
Table 2.12 – Basic characteristics of key automotive aftermarket sectors (2010 or more recent year
available)
Maintenance & Sale of motor vehicles Sale of parts and
repair of motor accessories
vehicles
Number of individual enterprises 440,793 197,000 112,755
Turnover (billion €s) 123.6 726.9 148.1
Number of persons employed 1,498,800 1,520,300 674,800
Average firm size (no. of employees) 3.6 7.7 6.1
Average firm turnover (million €s) 0.3 3.7 1.3
35
Apparent labour productivity 25.8 45.3 37.2
Number of SMEs 440,731 195,000 112,555
- share of SMEs in total employment 96.7% 83%
- share of SMEs in turnover 93.4% 71.2%
Source: Own elaboration on the basis of Eurostat data
Innovative capacity of the automotive sector
R&D investment
Investment in R&D and innovation represents a key aspect of the competitiveness of the EU motor vehicles
industry. European automotive firms are leaders in some transitional drive-train and fuel technologies and are
investing in ground-breaking technologies, such as battery-powered hybrid vehicles, electric vehicles and
hydrogen.
According to ACEA the sector is Europe's largest private investor in research and development (€20bn/annum)
representing about 4% of the industry’s turnover and 23% of EU industry’s total R&D expenditure. Data from
Eurostat for 2010 show that German firms account for the lion’s share of R&D investment in the sector (74% of
total) and have a much higher level of R&D intensity than all other countries. Data from the R&D investment
scoreboard based on published annual statements of companies indicates a level of R&D intensity similar to
that of the USA and Japan and higher than companies in China, Korea or Brazil. It should also be noted that
about 50% of total R&D investment comes from automotive suppliers and the same applies to patents.
34
Data provided by CLEPA
35
Gross value added/person employed - €s
21
Table 2.13 - R&D investment in the motor vehicles sector
Business R&D % R&D in % of R&D in % of R&D investment
expenditure turnover manufacturing country /share of net sales
(million €s) total in total
EU R&D
Vehicles Parts and Tyres
accessories
EU -27 23.4%
Germany 40,240 4.5% 37% 74% 4.5% 7% 5.8%
France 13,988 1.8% 12% 8.9% 4.4% 5.3% 3%
Italy 7,578 2.0% 14.1% 5.4% 3.4% 2.2% 2.9%
United 6,958 2.3% 17.7% 6.2% n.d. 2.1%
Kingdom
Spain 3,346 11% 1.9%
Poland 353 6% 0.1%
Czech 914 41% 1.9%
Republic
USA 4.5% 2.6% 1.8%

Japan 4.2% 5.6% 2.9%
China 1.2% 1.4%
S.Korea 2.1% 1.2%
Brazil 2.8% n.d.
Source: Eurostat, R&D and Innovation statistics and own elaboration
Data from the Community Innovation Survey also show that, in most countries, the share of innovative firms in
the motor vehicles sector (NACE 29 including trailers, parts and accessories) is higher than average in the
manufacturing sector.
Table 2.14 – Share of innovative enterprises in motor vehicles and components sector
Innovative enterprises Product and process innovative enterprises only
Manufacturing total motor vehicles Manufacturing total motor vehicles

BE 67.9% 65.3% 24.1% 19.5%
CZ 54.0% 54.8% 17.0% 24.5%
DE 83.0% 87.7% 22.2% 31.0%
ES 43.9% 57.7% 12.9% 25.1%
FR 56.1% 58.3% 17.9% 12.9%
IT 59.2% 56.7% 22.1% 33.3%
HU 30.4% 51.6% 6.1% 16.9%
NL 60.2% 69.8% 23.4% 35.0%
PL 28.5% 39.9% 8.3% 19.9%
PT 56.1% 60.7% 23.5% 35.0%
RO 30.4% 39.8% 9.1% 19.7%
SK 36.6% 53.4% 15.3% 23.6%
SE 61.1% 66.3% 18.2% 20.6%
UK 48.2% 42.9% 14.0% 13.0%
Source: Eurostat, R&D and Innovation statistics
22
The high level of R&D expenditure is also reflected in the high number of patents. The EU automotive industry
was the origin of more than 53% of the patents submitted to the European Patent Office, in comparison to the
36
21%, 15.6% and 0.4% of Japanese, US and Chinese manufacturers respectively . Data from the World
Intellectual Patent Office concerning patents filed in the transport sector also show the high level of innovative
37
activity of the EU industry .
Chart 2.4 – Number of WIPO patent publications in the transport sector by country of origin of applicant
35,000
30,000 China
Europe
25,000
France
20,000
Germany
15,000 Japan
USA
10,000
5,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: WIPO
Competitiveness of the automotive sector
In terms of market share and net trade position, the industry has largely maintained its global competitiveness
in recent years despite the impacts of the crisis and it has increased its presence in the markets of the
emerging economies. The restructuring of the sector and the increasing share of New Member States in the
total production have played an important role.
Trade balance
EU exports have grown significantly in all subsectors of the automotive sector and at rather high rates over the
last years. In comparison, imports have increased at a much slower pace, at least partly reflecting the
stagnation in demand for motor vehicles within the EU as a result of the financial crisis.
36
ACEA (2010), European automobile industry report
37
WIPO data do not provide a more detailed classification covering only the automotive sector.
23
Table 2.15 – Evolution of extra-EU imports and exports in the automotive sector (billion Euros)
Trade
balance
commercial parts and trailers and
YEAR tyres passenger cars Motor
vehicles accessories semi-trailers
vehicles
total
IMP EXP IMP EXP IMP EXP IMP EXP IMP EXP
2001 2.70 2.62 19.16 51.92 2.81 5.60 9.01 18.34 0.46 1.11 45.4
2002 2.71 2.56 20.46 58.56 3.18 5.66 8.98 19.49 0.37 1.17 52.5
2003 3.05 2.60 23.38 57.32 3.27 6.06 8.49 20.58 0.40 1.25 50.5
2004 3.38 3.05 26.57 59.68 3.70 7.11 8.74 22.89 0.45 1.49 52.5
2005 3.89 3.42 26.81 63.23 4.01 8.90 9.64 22.27 0.55 1.72 57.6
2006 4.49 3.59 31.94 68.07 4.53 10.39 10.98 24.71 0.62 2.10 59.9
2007 5.69 3.95 33.77 71.03 5.12 12.20 12.67 26.26 0.91 2.73 62.8
2008 5.62 4.06 30.05 69.57 5.48 14.42 12.94 27.38 1.03 3.13 70.5
2009 4.51 3.27 22.27 48.22 3.04 8.82 8.85 21.06 0.68 1.76 47.1
2010 5.52 4.25 22.67 76.36 3.95 11.88 12.77 31.38 0.87 2.29 83.8
2011 7.17 5.48 24.73 93.88 4.49 14.04 15.10 36.48 1.05 2.97 107.4
2012 6.61 6.45 24.20 108.2 3.98 17.01 15.60 40.33 1.12 3.40
Source: Eurostat Trade data, own elaboration
In total the automotive industry – excluding tyres – has had a positive trade balance in all main segments. In
2011, the value of production for the whole sector reached €107 billion. The positive trade balance came
primarily from passenger cars. The EU has only a small trade deficit in the subcategory of light commercial
vehicles, with most imports coming from Japan and the USA. The EU is also a net exporter of automotive parts
and accessories, with a trade surplus of €25billion in 2012. German manufacturers are responsible for more
than half (60%) of the total EU exports followed by the UK (13%). The United States and China are the two
main export markets representing, respectively, 26.6% and 11.5% of the total value of exports of the EU
passenger car market. In terms of imports, in 2009, over three quarters of EU passenger cars imported came
from Japan, Turkey, the USA and South Korea.
Having said that, despite their increasing presence, EU manufacturers appear to control only small market
shares in a number of third countries (see chart 2.5), primarily those with national players (Japan, USA) but
also in China. It is in other third countries’ markets – such as in the Latin America- where EU firms have
significant market shares.
24
Chart 2.5 - Vehicle Manufacturer Market Share by Region, 2010
Source: Casesa & Co., JD Power LMC Forecast.

We should note here that, unlike the motor vehicles markets (passenger cars, commercial vehicles) certain
segments of the market such as the trailers and semi-trailers or special purpose vehicles are still very much EU
or even nationally focused. There are a few relatively large EU manufacturers (mainly in Germany) with
production volumes of no more than 100,000 units/year (in comparison to more than a million for the OEMs)
and many more firms that focus on their domestic markets that most often produce less that 1,000 units. Such
firms often use the Individual Vehicle Approval (IVA) route to enter their products into the market.
A number of indicators reveal the significant competitive advantage of the automotive sector but also point to
38
increasing challenges. Using UN COMTRADE data we have calculated the Revealed Comparative Advantage
indicator for a number of key product categories for the EU-27 (Table 2.16). The data indicate an increasing
level of relative competitiveness of the motor vehicles manufacturing sector driven by a number of subsectors
including passenger cars, special purpose motor vehicles, motor vehicle chassis and bodies and parts and
accessories. In the parts and accessories sectors the RCA index has been more than 1 –indicating a
comparative advantage – since 2008. Table 2.17 compares the evolution of the RCA indicator of the EU with
the main competitors. Japan and South Korea - both with strong presence in the motor vehicles markets –
have higher levels of RCA in comparison to the EU. China, Brazil and India still have very low scores of RCA
indicators – although they appear to be more competitive in specific segments. Thailand is another country
with an increasing degree of specialisation in the motor vehicles sector – particularly in the commercial
vehicles segment – driven by a significant level of FDI in the country.
Table 2.16 - EU27 RCA for main categories of automotive vehicles (2002-2012)
Code Description 2002 2004 2006 2008 2010 2012
4011 New tyres 0.67 0.75 0.72 0.73 0.65 0.67
4012 Retreaded tyres 0.85 1.00 0.96 0.92 0.98 0.80
87 Motor vehicles 1.04 1.10 1.16 1.23 1.32 1.33
38
Revealed Comparative Advantage (RCA) compares the share of a given industry’s exports in the EU’s total
manufacturing exports with the export share of the same industry in the manufacturing exports of a set of
reference countries.
25
Code Description 2002 2004 2006 2008 2010 2012
8702 Buses/coaches 0.87 0.84 0.75 0.99 0.76 0.66
8703 Passenger cars 1.19 1.21 1.27 1.29 1.47 1.53
8704 Commercial vehicles 0.51 0.65 0.75 0.97 0.94 0.96
8705 Special purpose motor vehicles 2.46 2.36 2.70 2.57 3.03 3.00
8706 Motor vehicle chassis fitted with engine 1.31 1.44 1.39 1.55 1.71 1.37
8707 Bodies for motor vehicles 0.60 0.74 1.15 1.71 2.43 1.86
8708 Parts and accessories for motor vehicles 0.80 0.91 0.96 1.02 1.09 1.04
Source: UN Comtrade data, own elaboration
Table 2.17 - RCA indicator for the motor vehicles sector (HS87)
2002 2004 2006 2008 2010 2012
Japan 2.30 2.21 2.54 2.75 2.57 2.49
South Korea 1.08 1.34 1.52 1.43 1.54 1.56
EU27 1.04 1.10 1.16 1.23 1.32 1.33
Thailand 0.45 0.64 0.90 1.17 1.28 1.29
USA 0.92 0.95 1.04 1.07 1.04 1.05
Brazil 0.76 0.92 1.04 0.93 0.83 0.63
India 0.21 0.31 0.35 0.42 0.57 0.52
China 0.18 0.21 0.27 0.34 0.33 0.33
Within the EU, the countries with a comparative advantage include the traditional manufacturers (Germany,
France, Spain, UK, Sweden) and a number of Central and Eastern Europe countries where OEMs have made
significant investments during the last 10-15 years (Czech Republic, Hungary, Poland, Romania, Slovakia,
Slovenia). Because of the smaller size of their economies and their high level of exporting to other EU markets,
some of these countries have particularly strong RCA indicators.
Table 2.18 - RCA indicator for the motor vehicles sector (HS87) in selected EU countries
2002 2004 2006 2008 2010 2012
Germany 1.87 1.79 1.88 1.64 2.08 1.95
France 1.43 1.56 1.40 0.53 1.20 0.99
Italy 0.82 0.87 0.93 0.93 1.10
Spain 2.3 2.44 2.36 1.70 2.27 1.73
UK 0.94 1.06 0.96 1.43 1.19 1.16
Sweden 1.13 1.35 1.42 2.75 1.19 1.10
Czech Republic 1.84 1.58 1.93 5.46 2.24 2.04
Poland 0.96 1.31 1.55 2.07 2.00 1.34
Romania 0.26 0.35 0.72 3.57 1.87 1.51
Slovakia 2.02 2.39 2.28 9.15 3.08 2.76
Hungary 0.88 0.83 1.12 1.39 1.22 1.17
Slovenia 1.25 1.31 1.56 1.78 1.83 1.37
26
Another feature of the automotive sector is the very high level of vertical specialisation (i.e. share of imported
39
intermediates in exports) which, according to the 2011 EU industrial structure report , was close to 60% in
2005, up from 47% in 1995. This reflects the fact that the production of vehicles is frequently dependent on
the import of components, parts or systems from other EU and non-EU countries.
Foreign Direct Investment – inflows and outflows
Data on the level of FDI stocks inside the EU in the motor vehicles sector indicate that the older Member
States (primarily Germany, France, Italy and the UK) continue to attract significant levels of FDI in the sector. In
parallel, there has been a high level of FDI to New Member States (EU12) originating both from within the EU
but also from outside the EU27. Japan and the USA are some of the main countries of origin.
Table 2.19 - Evolution of investment stock in the motor vehicles sector in EU15 and New Member States
(EU12) by origin (numbers in € millions)
Total FDI Total Intra-EU27 Total Extra EU-27 Japan USA
EU15 EU12 EU15 EU12 EU15 EU12 EU15 EU12 EU15 EU12
2004 52,359 13,528 16,564 3,441 35,808 10,087 5,358 886 11,890 780
2005 45,975 17,025 26,518 6,305 19,448 10,720 1,089 990 4,680 856
2006 47,523 20,308 3,1394 13,001 16,128 7,307 724 1,232 7,786 941
2007 39,773 23,676 21,338 14,686 18,435 8,990 1,609 1,490 10,170 1,066
2008 36,810 20,507 18,169 13,119 16,240 7,388 1,574 1,440 8,991 787
2009 45,944 20,726 18,297 5,884 12,294 14,842 1,364 1,303 8,745 825
2010 44,137 15,379 29,822 14,315 1,063 114 7,860 379
Source: Eurostat – Balance of payments statistics
At the same time, Eurostat data on the level of FDI outflows from the main motor vehicles manufacturers
indicate an increase in the investments outside the EU27 during the last few years, an important share of
which is directed to the BRIC countries. In parallel, there is a continuing investment of EU manufacturers
within the EU – primarily in the New Member States. Recent reports on investments in the motor vehicles
sector also confirm these trends.
39
EC (2011), EU Industrial Structure- 2011 Report, http://ec.europa.eu/enterprise/policies/industrial-
competitiveness/competitiveness-analysis/eu-industrial-structure/files/eu_ind_str_2011_ch4_en.pdf
27
Chart 2.6 - Evolution of investment stock of the EU motor vehicle sector inside and outside the EU
(aggregate of German, Italian and French manufacturers) (numbers in € millions)
Source: Eurostat and own elaboration

The available data on the country of ownership of firms in the sector illustrate the evolution of investment in
the motor vehicles industry within the EU from a different angle. There has been a significant increase in the
number of foreign controlled firms in the countries of Central and Eastern Europe during the last few years. In
some countries (Romania, Slovakia) the number of foreign controlled firms almost doubled in a period of 5
years and, with the exception of Czech Republic, it has been the main driver of the increase in the total
number of firms in the sector. In addition, while in Western European countries – particularly the UK but also
Germany, Sweden and Italy - foreign controlled enterprises are subsidiaries of non-EU manufacturers, in
Central and Eastern Europe the majority of foreign controlled firms are subsidiaries of EU firms.
28
Table 2.19 - Foreign control of EU enterprises in the automotive sector
No of foreign controlled Share of intra-EU27 Share of foreign
enterprises controlled to total foreign controlled to total firms
controlled
2006 2010 2006 2010 2006 2010
Czech Republic 156 242 64% 67% 30% 17%
Germany 200 222 53% 42% 8% 8%
Spain 132 178 75% 74% 6% 9%
France 158 162 62% 65% 8% 8%
Italy 125 121 57% 56% 6% 5%
Hungary 97 130 67% 78% 24% 27%
Poland 160 191 83% 77% 31% 36%
Portugal 50 61 80% 80% 10% 12%
Romania 71 169 77% 80% 18% 39%
Slovenia 9 11 78% 82% 9% 8%
Slovakia 47 97 n.d. 79% 35% 48%
Sweden 85 82 54% 54% 9% 8%
UK 225 200 34% 35% 7% 7%
The picture concerning foreign affiliates of EU manufacturers is a bit more complicated. German, Italian and
British manufacturers of vehicles and/or components have increased the number of affiliates both inside and
outside the EU over the period 2007-2010. In the case of French manufacturers there has been a significant
reduction – particularly inside the EU - in parallel with an increase of foreign affiliates in the BRIC countries.
Table 2.20 - Foreign affiliates of EU enterprises in the motor vehicles sector – selected countries
EU27 Outside EU27 BRIC countries
2007 2010 2007 2010 2007 2010
Germany 309 462 381 513 72 126
France 486 198 229 214 45 83
Italy 73 93 78 122 38 56
Sweden 138 81 158 92 44 13
UK 20 28 58 72 n.d. 4
Unit labour costs and productivity in the motor vehicles sector
Chart 2.7 below shows that there were very marked differences in the trends in unit labour costs in the
industry among EU Member States. In some countries (e.g. Czech Republic, Slovakia, Germany and UK) there
have been substantial reductions in ULCs primarily reflecting productivity gains (see also table 2.21). In
contrast, in Hungary, France, Italy and Spain the increased unit labour costs reflect an increase in the
40
employment compensation . In comparison to the main competitors for which data were available, there has
been a significant decrease of ULC in the United States – driven primarily by increased productivity levels – and
a small increase in Korea.
40
Ecorys (2011), Study on the cost competitiveness of European industry in the globalisation era - empirical
evidence on the basis of relative unit labour costs (ULC) at sectoral level,
http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=7060
29
Chart 2.7 - Evolution of unit labour costs in the motor vehicles sector – selected countries
200
180 Korea
United States
160
Czech
140 Republic
France
120
Germany
100 Hungary
80 Italy
Slovak
60 Republic
Spain
40
United
Kingdom
20
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: OECD
Table 2.21 – Productivity levels in selected Member States (Value added per employee – Thousand Euros)
Country 2003 2010
EU27 57.1 64.9
DE 71.1 89.2
UK 52.3 84.0
SE 65.6 74.3
FR 62.4 62.5
IT 42.2 61.2
ES 54.0 57.6
HU 36.6 43.9
SK 26.1 37.4
CZ 23.6 37.1
SK 25.2 31.3
PL 21.0 29.7
RO 4.9 13.2
Source: Eurostat
2.3 - Developments in the automotive sector

The automotive manufacturing industry is in a period of significant and fast change which has been
accentuated by the financial crisis. A review of the relevant literature points to the following issues of
relevance to the study:
30
Market developments
● By 2025 China alone is expected to account for 31% of the sales of light vehicles, compared to just 3% in
2000. By contrast, the share of EU, Japan and the US in the sales of light vehicles is expected to decrease
41
from 80% in 2000 to just 44% in 2025 .
● The fast growth of markets outside of Europe has already led to an increasing number of new production
facilities belonging to EU manufacturers being located in the emerging economies and this is followed by
manufacturers of components. In 2010, EU firms in the motor vehicles sector had 1792 affiliates, up from
42
1221 in 2009 . There are significant changes in the structure of the automotive supply and value chain
with significant logistical challenges for EU manufacturers.
● Products are also increasingly designed specifically for these new markets. Cars based on B versions of
vehicles developed for EU, US and Japan are no longer successful. This trend will continue, leading
companies to set up local R&D facilities too. New brands are also being created specifically for these
43
markets .
● In the commercial vehicles sector, particularly heavy duty vehicles, manufacturing in emerging markets
represents more than 65% of total production and is achieving continuously increasing shares of the
44
growing emerging markets .
● In mature markets, the need for car ownership is becoming less clear. Several companies are exploring the
idea of a subscription service that enables consumers to choose the vehicle they need at the moment—
but without requiring ownership. The next decade is likely to witness early entrants that will be selling
45
integrated mobility services to consumers in mature markets such as Western Europe.
Non-EU competition
● There is increasing competition for the EU automotive industry on a worldwide scale, particularly coming
from manufacturers in India and China that already have significant shares in their own domestic markets.
In these new markets low-costs cars are considered to have a significant growth potential, answering the
increasing demand for basic transportation.
● So far, there is only a limited presence of these manufacturers in EU markets – particularly in the
passenger cars segment. There were 2030 foreign controlled enterprises across all 27 EU member states in
the motor vehicles sector in 2010 (10% of the total enterprises in the sector) and more than 60% were
controlled by EU manufacturers. However, companies like the Indian Tata intend to export revised
46
versions of its cheap NANO model to the US and Europe .
● Over the last ten years, the number of relevant manufacturers has grown from 13 to 23. Some of these
"new" OEMs have already gained considerable volumes, with annual production of over 0.6 million units
in 2010. Their market share will grow from its current level of 9% to 11% in 2025. By 2025, between four
47
and six new players – particularly from China – could emerge and become powerful (e.g. BYD) . Their
market share is expected to reach 5% in 2025. In addition there will be a number of small OEMs, often
with very limited regional coverage.
41
Roland Berger automotive landscape 2025
42
Based on Eurostat data
43
44
Alix Partners, 2010, High Stakes 2010 Global Commercial Vehicle Outlook
45
Nassif,A., and Valsan, A, (2011), Automotive Industry Mega Trends,
http://autobeatinsider.com/perspectives/automotive-industry-mega-trends
46
Roland Berger (2011) Automotive landscape 2025 - Opportunities and challenges ahead
47
31
● Over the next 15 years, small vehicles are expected to show the fastest growth worldwide. The absolute
margins – and often the relative margins too – on smaller cars tend to be lower than on bigger models.
Consequently, the disproportionate growth of the A/B segment will lead to greater cost pressure on OEMs
48
and, by extension, suppliers. Across the board, cost efficiency will play an even greater role than today .
Production and supply chain
● The car industry has been affected by rising costs of several important input goods (raw materials) such as
steel and metals. The rising raw material costs have narrowed the profit margins on car production which
tend to be less than 5%. The worst affected markets were France, Spain and Italy where almost 85% of the
cars sold are small- and medium-sized cars which already have lower profit margins.
49
● The CARS21 report referred to the need for the adaptation of production capacities – including possibly
the closure of a number of production plants, the development of new business models and production
methods and the identifications of new sources of raw materials. The capacity utilisation rate (sales
compared to the production capacity) in the EU fell by 30% to as low as 65% by 2009. A decline of 5% is
already enough to eradicate average profits while a 20% drop forces restructuring. In the CARS 2020
50
Communication from the Commission ., a number of measures were proposed to deal with restructuring
aiming to identify successful practices in restructuring and adaptation to changes in the market and
avoiding large scale redundancies
● A concerted effort has been made over the last 20 years to reduce the number of parts that
manufacturers conceive, design, develop and manufacture. Instead they have aimed to re-use the same
parts, sub-systems and ultimately entire vehicle platforms. They use the same parts, sub-systems and
entire vehicle platforms across different model ranges and a number of them have already moved further
51
to the co-development and sharing of core production platforms . Some manufacturers have followed a
strategy of ensuring that any given model is as close to being identical as possible in all world markets.
● As technology becomes ever more complex, with shorter life cycles, companies more and more seek
alliances and co-developments with partners from other industries including battery manufacturers,
electric component suppliers, telecommunications and even IT companies. In addition to accessing new
technology, alliances or mergers and acquisitions are used by OEMs to enter new markets and reduce
52
risks.
● The CARS 21 report also referred to the need to develop new skill profiles, tackle the resulting changes in
employment and invest more in innovation in order to maintaining the competitiveness of the automotive
sector. The subsequent CARS2020 Action Plan identified certain actions – including the European
Automotive Skills Council - to analyse trends in automotive employment and skills that could form the
basis of recommendations for policymakers, education, training providers and other stakeholdersError!
Bookmark not defined..
48
Roland Berger (2011) Automotive landscape 2025 - Opportunities and challenges ahead
49
CARS 21 High Level Group on the Competitiveness and Sustainable Growth of the Automotive Industry in the
European Union, Final Report 2012
50
EC (2012), Commission Communication: CARS 2020-Action Plan for a competitive and sustainable
automotive industry in Europe, COM(2012) 636 final, http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0636:FIN:EN:PDF
51
Evalueserve (2012), White Paper - Platform Strategy will Shape Future of OEMs - Flexibility to Drive Growth
http://sandhill.com/wp-content/files_mf/evalueservewhitepaperplatformstrategywillshapefutureofoems.pdf
52
KPMG (2012), KPMG’s Global Automotive Executive
52
Survey 2012, http://www.kpmg.com/GE/en/IssuesAndInsights/ArticlesPublications/Documents/Global-
automotive-executive-survey-2012.pdf
32
● At the same time, better access to markets in third countries is considered key in maintaining the
competitiveness of EU industry. In the CARS 21 report, industry representatives made reference to the
presence of tariff and non-tariff barriers for access to some emerging markets (e.g. Korea, China, India).
Acceptance of international regulations under the 1958 UNECE Agreement is considered to be the best
way to remove non-tariff barriers to trade and has highlighted the need for bilateral regulatory
cooperation with third countries to be strengthened, with a view to eliminating non-tariff barriers. The
CARS2020 Communication makes reference to action taken by the Commission to revise the 1958
Agreement and a development of a first proposal for a new Regulation on International Whole Vehicle
53
Type Approval
54
● The global automotive supplier industry achieved record profitability in 2010 (6.2% operational profit
margin on global average). European suppliers have been outperforming North American and Japanese
suppliers in terms of operation profit margins (EBIT). Chinese and other Asian countries suppliers have
achieved even high margins.
Chart 2.9 - Profitability of parts and accessories suppliers
55
Source: Lazard, Roland Berger Strategy consultants
2.4 - Analysis of cost structures in the automotive sector

In order to assess the impact of specific policy changes on costs for business it is important to have an
understanding of the cost structures of the industry. Policy measures that directly or indirectly affect cost
elements that are a significant part of the total cost of production have a higher potential impact on the costs
of doing business.
For this study the main sources of data have been a study on behalf of the U.S. Environmental Protection
56
Agency complemented by our own analysis of available profit and loss accounts of enterprises using the
53
EC (2012), Commission Communication: CARS 2020-Action Plan for a competitive and sustainable
automotive industry in Europe, COM(2012) 636 final, http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0636:FIN:EN:PDF
54
EBIT: Earnings before interest and taxes
55
http://www.rolandberger.com/media/press_releases/511-
press_archive2011_sc_content/Global_automotive_supplier_study_with_Lazard.html
56
EPA (2009), Automobile Industry Retail Price Equivalent and Indirect Cost Multipliers, Report Prepared for
Gloria Helfand U.S. Environmental Protection Agency , http://www.epa.gov/otaq/ld-hwy/420r09003.pdf
33
ORBIS database of Bureau Van Dijk. Discussions with industry stakeholders have also sought to verify some of
the findings, primarily in relation to average profit margins. However, the data collected do not cover all sub-
segments of the automotive sector affected by the proposed measures.
The study on behalf of the US Environmental Protection Agency provides a detailed breakdown of the costs of
57
large motor vehicle manufacturers . Total direct manufacturing costs (consisting of production labour costs,
direct materials and component costs and other direct expenses) are found to represent 75-80% of the
operating costs and around 65% of the turnover. Production overhead costs - including warranties, R&D,
maintenance and repair, depreciation and other cost of operations- represents on average 15% of the
operating costs and 12% of the final retail price. Corporate overhead costs (including mainly administrative
58
costs) represent 5% while costs of sales (transportation and marketing) around 6% of turnover. The OEMs’
own profit margin per vehicle as a share of the retail price is around 3% although this differs depending on the
size and type of car. In the low-cost segments profit margins are often less that 2%. On the other hand, in the
case of sports cars – which are sold in much smaller volumes - no more than a few thousands per year – profit
margins tend to be much higher.
In the same study, a breakdown of the manufacturing costs indicated that the cost of components is around
71% of the total, while raw materials are around 12.5% and manufacturing costs (mainly representing labour
costs) 17%.
Chart 2.10 – Contribution of different cost elements to the total suggested price of motor vehicles
100.0% 3.1%
2.6%
90.0% Sales & marketing 7.2%
2.5%
80.0% Maintenance Transportation
5.2%
2.0% 2.8%
Depreciation/Warranties
70.0% 6.4%
Labour R&D
60.0% 3.3%
10.9%
Raw materials
50.0%
8.1%
40.0%
30.0%
Componenets
20.0% 45.9%
10.0%
0.0%
Maufacturing Production Corporate Sales cost Dealer Other Profit margin
costs overhead overhead
Source: EPA, 2009

Similar data from other sub-sectors are not available. However, the analysis of the profit and loss accounts of
firms included in the ORBIS database provides some relevant figures. The analysis of the available income
statements of firms in the different subsectors indicates that production related costs in 2010 represented
more than 80% of the total operating costs in all subsectors (including tyre manufacturing). R&D activity in
most sectors is typically in the range of 3.5-4%. Other non-production operating costs – including selling,
57
Includes the major European, Japanese, Korean and US passenger cars manufacturers.
58
Typically include expenses to manage the business (salaries of officers / executives, legal and professional
fees, utilities, insurance, depreciation of office building and equipment, office rents, office supplies, etc.)
34
general and administrative expenses – are typically around 13-17%. This provides some guidance as to the
maximum potential impact of administration related obligations.
Table 2.22 - Analysis of operating cost structure and profit margins for the main subsectors of the
automotive industry – analysis of aggregate income statements of firms in the sector (2010)
292 - bodies for
motor vehicles; 293 - parts and 221 –
291 - motor
manufacture of accessories for Manufacturing
vehicles
trailers and semi motor vehicles of tyres
trailers
Costs of goods sold (raw 81.6% 82% 80.3% 81.5%
materials and components,
labour and production
overhead)
Other operating costs 14.7% 15% 16.9% 12%
(Selling, general and
administrative expenses)
R&D costs 3.8% 3.9% 2.8% 6.5%
Total 100% 100% 100% 100%
Operating profit (% of sales) 6.4% 6.3% 4.8% 7.5%
Net Profit margin (% of sales) 4-5% 5% 2.8% 4.2%
Source: Own elaboration from Orbis database
Data were not available for the aftermarket segment. The interviews with the industry representatives
suggested that authorised dealers’ profit margins are typically less than 2% of turnover. The profit margins of
independent dealers tend to be much higher, probably around 10%.
For the purposes of our study, the key points are that profit margins are rather small for most manufacturers
of vehicles. Possible exceptions are the independent vehicle dealers and manufacturers of sports and luxury
cars. Thus, as a general picture, increases in operational costs as a result of regulation can have a noticeable
impact on the profitability of manufacturers. At the same time though, production and corporate overhead
costs - are no more than 15% of the total operational costs – around 5% if sales and marketing are excluded.
Minor increases in administrative costs are therefore not expected to lead to significant increases in overall
operational costs. However, there may be a difference between large and small size firms. Unfortunately, the
available data (from commercial data sources) are mainly for large firms and do not allow an assessment of
any differences between large and small firms in the significance of the different types of costs. .
35
Competitiveness proofing analysis 3

In this section we provide an analysis of the impacts of the selected policy options on the competitiveness of the
different segments of the automotive sector.
3. Analysis of the impacts of the policy measures

In this section we examine each of the five selected policy options in greater detail presenting the findings of
the RPA study and focusing on the aspects relevant for the competitiveness proofing.
The three dimensions examined include:
● Cost competitiveness: the cost of doing business, which includes cost of intermediate inputs (incl.
energy) and of factors of production (labour and capital);
● Capacity to innovate: the capacity of the business to produce more and/or higher quality products
and services that better meet customers' preferences
● International competitiveness: the above two aspects could also be assessed in an international
comparative perspective, so that the likely impact of the policy proposal on the European industries’
market shares and revealed comparative advantages is taken into account.
For each of the selected policy options we describe briefly the nature of the issue, analyse the expected impact
of the proposed policy option on the base of the findings of the RPA study and our own initial desk research
and identity the sectors affected.
3.1 - Attention area A: Traceability of products and responsibilities of economic operators

Problem definition
Product traceability is considered to be an important element in ensuring that unsafe and non-compliant
products found on the market are effectively traced back to the party responsible for their production and the
faults effectively remedied. As noted in the EC roadmap, “the lack of information to identify and trace the
origin of non-compliant products encountered on the market and to establish who are the economic operators
in the supply chain to be held accountable is detrimental for an effective enforcement strategy, as it hampers
enforcement authorities in identifying and taking remedial action against non-compliant products and
59
economic operators not respecting the rules” . The earlier RPA study estimated that this specific problem
possibly accounts for 7.5%-10% of the total of non-compliant and unsafe automotive devices in the market,
60
representing a market value in the range of €0.375-3 billion Euros on annual basis .
In its current form the Directive 2007/46/EC (Article 19) requires the manufacturer of a component or
separate technical unit, whether or not it is part of a system, “to affix to each component or unit manufactured
in conformity with the approved type, the EC type-approval mark required by the relevant separate directive or
regulation. Where no EC type-approval mark is required, the manufacturer is to affix at least his trade name or
trade mark, and the type number and/or an identification number”.
Furthermore, the Directive makes reference to manufacturers and their authorised representatives and does
not set any specific requirements for importers and distributors of vehicles and components. Although the
Directive contains a provision that when components are imported into the EU, the manufacturer has to
59
EC Roadmap,
http://ec.europa.eu/governance/impact/planned_ia/docs/2011_entr_011_enhance_implementation_internal
_market_motor_vehicles_en.pdf
60
In this study we made of the RPA study estimates of the possible size of Non compliant and unsafe products
and the contribution of the different areas of attention. Given the limited resources available, we did not
attempt to verify these estimates.
36

appoint a representative established in the EU, it is questionable how and to what extent this requirement can
61
be legally enforced upon a third country manufacturer .
In the Commission’s earlier public consultation around 70% of respondents stated that there is a need to
clarify the rules on providing information to ensure the traceability of automotive products and the role and
62 63
responsibilities of the economic operators involved in the supply chain . Similarly, the responses to the RPA
study suggest that a shift of production towards emerging economies is considered by many stakeholders as
likely to increase the supply chain complexity in the future and thus increase the importance of having a more
robust framework that ensures product traceability and safety.
Thus, the aim of the proposed policy intervention is to:
a) address the problems relating to the identification and traceability of Unsafe automotive devices (UADs) and
Non-compliant Devices (NCDs) encountered on the market (i.e. to ensure that automotive products on the
market can be effectively traced to enable effective remedy in the event of faults); and
b) clarify the responsibilities and accountability of various economic operators with regard to the compliance
of the products they are involved with (i.e. to ensure that all economic operators are fully aware of their
responsibilities).
This was expected to be achieved with the incorporation of elements of the NLF (Decision 768/2008/EC, Annex
I, Regulations R2 to R7). The relevant elements included:
● Product Traceability: Manufacturers will be required to ensure that their products - or the packaging or
documentation, depending on the size and nature of the product - bear a type, batch or serial number or
other element allowing their identification.
● Company Traceability: All economic operators will be required to retain full details of all businesses to
64
which they have supplied, or which have supplied them with, vehicles and/or automotive devices .
● Clarify the responsibility and obligations of economic operators, importers and distributors following the
provisions of the NLF. The NLF provides definitions of the different possible roles (manufacturers,
authorised representatives, importers, distributors) and their obligations.
The RPA study provided an analysis of the relevant articles. However, our understanding is that it is unlikely
that all the provisions identified in the RPA study will be included in a possible proposal for the Motor Vehicles
Type Approval Framework Directive. This is supported by the nature of the provisions in the recently adopted
65
Regulation 168/2013 on the approval and market surveillance of two or three wheeled vehicles . The analysis
(presented in Annex C in detail) suggests that there are two important differences in comparison to the basic
assumptions of the RPA study, both of which have implications for the competitiveness proofing assessment.
More specifically:
61
EC (2010), DISCUSSION NOTE FOR THE TCMV MEETING OF 26 MARCH 2010, Item 4. Presentation and
continued exchange of views on the possible impact of the New Legislative Framework – in particular its
market surveillance provisions and practice – on the acquis in the automotive sector,
https://circabc.europa.eu/sd/d/23a74654-15c8-4225-a9ca-db204331e6e7/note%20on%20market%25
62
http://ec.europa.eu/enterprise/sectors/automotive/files/consultation/internal-market/statistics_en.pdf
63
A total of 40 responses were analysed but there is no information on the breakdown by category of
stakeholder.
64
This obligation does not include sales to end-users
65
REGULATION (EU) No 168/2013 on the approval and market surveillance of two- or three-wheel vehicles and
quadricycles
37

 there would be no requirement that the products bear a type, batch or serial number or other element
66
allowing their identification . This is closely linked with the assessment of the actual need for the
introduction of technologies such as RFID tags or other direct product markings that allow individual
67
components to be identified .
 there would be no requirement for importers to carry out sample tests of marketed products
Since there is no clear indication as to which approach will be followed, we have treated the provisions of the
Motor Cycles Regulation 168/2013 as the most likely scenario for our analysis, while we still considered the
possible implications of the unlikely scenario of a more extensive interpretation of the NLF provisions requiring
the individual identification of components for traceability purposes .
Analysis of impacts
Sectors affected
The first step in the analysis has been the identification of the sectors directly or indirectly affected by the
proposed provisions. These are:
Sectors directly affected:
 Manufacturers of vehicles: these include the large OEMs and the small volume vehicle producers and
manufacturers of trailers and semi-trailers. Under the provisions for all economic operators they are
required to identify their suppliers and their clients to surveillance authorities. They will also have to
indicate their name, registered trade name or registered trade mark and the address at which they can
be contacted on the product or, where that is not possible, on its packaging or in a document
accompanying the product. The address must indicate a single point at which the manufacturer can be
contacted. Furthermore, under the unlikely NLF scenario they need to ensure that their products - or the
packaging or documentation depending on the size and nature of the product - bear a type, batch or
serial number or other element allowing their identification.
 Manufacturers of components or parts: the above requirements are also applicable to suppliers of
components, systems, separate technical units and spare parts that are covered by Directive 2007/46/EC
on type approval. This means that not all individual parts and components are covered and that the
requirements apply directly primarily to Tier 1 suppliers and less so to Tier 2 and 3. As in the case of OEMs,
component suppliers at Tier 1 level are part of the supply chain
 Manufacturers of tyres: as in the case of components, manufacturers of tyres will have to provide the
same information as manufacturers of vehicles.
 Distributors and importers of vehicles components and spare parts and tyres: Within this category there
are multiple roles. Distributors of vehicles include franchised or independent dealers of vehicles.
Components and spares distributors may be authorised by the OEMs or be independent. These sub
sectors tend to have different roles and responsibilities within the supply chain largely determined by the
connection or not with the large manufacturers of vehicles or components. Firms may have the role of
distributor and/or importer. Discussions with representatives of members of the aftermarket sector
suggest that they typically assume the role of distributor and do not directly import products into the EU.
This is usually done by manufacturers through their own authorised representatives.
Sectors indirectly affected
66
According to Article R2 of the NLF Decision 768/2008 Manufacturers need to ensure that their products - or
the packaging/documentation depending on the size/nature of the product - bear a type, batch or serial
number or other element allowing their identification.
67
Whole vehicles already have individual identification numbers (VIN).
38

Suppliers of traceability systems may be indirectly affected by an increase of market demand for such systems
as a result of the strengthened requirements for traceability. However, this impact would only be significant if
the proposed requirements introduced the need for RFID tags or other traceability systems. As already
explained this is not expected to be the necessary under the current proposals.
Impact on costs and price competitiveness
Manufacturers of vehicles and components
The discussions with representatives of OEMs, manufacturers of small volume vehicles and trailers and semi-
trailers producers suggest that the proposed traceability requirements – identification of suppliers and
customers, information on products allowing their identification, provision of their name and contact
information - are already met and, as a result, the cost implications are very limited in most cases.
Large OEMs have established supply chain management systems in cooperation with their Tier 1 suppliers
which, in some cases, also include Tier 2 and 3 suppliers. OEMs and their suppliers often use direct product
marking (DPM) or radio frequency identification (RFID) are technologies for the management of the supply
chain. For some automotive part suppliers, details including the part lot number, manufacturer and other
pertinent tracking information are automatically recorded as part of a customer’s invoice records.
Furthermore, market developments, safety concerns (including the frequency and costs of recalls) and
68
regulatory developments (such as the TREAD ACT in the USA ) are leading to increasing use of product
traceability technologies.
There are still many different approaches and applications that are customised to specific trading partner
relationships and differ across the industry supply chain. They make changes to supplier networks problematic
although there are already industry-wide efforts to standardise the process (e.g. the ODETTE
69
Recommendations) . Furthermore, the introduction of the REACH Regulation on chemicals has also led to the
adoption of specific systems for the exchange of information along the supply chain that can be utilised in the
70
case of more advanced traceability requirements .
However, according to OEMs neither the introduction of RFID tags nor of other direct product marking systems
is considered necessary to fulfil the proposed provisions concerning the information on suppliers and
customers – which is already collected by other means. Similarly, to the extent that there are requirements for
components to be identified by batch or lot number, this is already common practice. While a serial number
for each individual component is a possible approach that would fulfil the requirements of the relevant
provision, it is not mandatory and from the point of view of the industry is thought to be disproportionate. .
The position of other categories of manufacturers is quite similar. Smaller size producers of sports and luxury
cars or of trailers consider that their current practices meet the proposed traceability requirements. For sports
cars that are sold in small volumes, manufacturers have close relationships both with their suppliers and with
(the smaller number of) customers. The representative of manufacturers of trailers and semi-trailers also
argued that the proposed provisions can be met by existing practices. While often not using sophisticated or
advanced IT systems, the identification of suppliers and those they supply is a well established practice and
does not require any changes. Main components (e.g. power trains, chassis) also bear a type, batch or serial
68
The Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act enacted on
November 1, 2000 contains provisions requiring vehicle and equipment manufacturers to report periodically to
NHTSA on a wide variety of information that could indicate the existence of a potential safety defect and to
advise NHTSA of foreign safety recalls and other safety campaigns,
http://www.nhtsa.gov/nhtsa/announce/testimony/tread.html
69
http://www.odette.org/newsletter1201/RFID.htm
70
Interim Evaluation: Functioning of the European chemical market after the introduction of REACH
Final report, Case studies, http://ec.europa.eu/enterprise/sectors/chemicals/files/reach/review2012/market-
annex_en.pdf
39

number or other elements allowing them to be identified. For smaller components there is typically
information available on the supplier and the specific batch but no individual serial number.
In contrast, under the unlikely scenario where an individual serial number would become mandatory, most of
the firms will have to introduce more advanced tracking processes with one-off investments in IT systems and
also certain administrative costs. The earlier analysis of the costs of Type Approval for such manufacturers (in
the Fitness Check) suggested that most of these firms allocate 1-2 FTE on legal aspects of type approval
activities and these would be expected to become responsible for the proposed activities. Manufacturers of
trailers and semi-trailers are mainly small size firms (less than 250 employees) that usually focus on their
respective national markets; very few of them have an EU wide range.
From the point of view of manufacturers of parts and components, the discussions with CLEPA
representatives also suggests that for the majority of suppliers, existing traceability systems should allow them
to fulfil the proposed requirements. For those parts where it is physically possible to have an identification
number (in terms of size), they usually already have one. This is particularly the case if, as is expected, the
proposed provisions cover only products that fall under the Type Approval regime - only part of the total
15,000-30,000 components that are used in a motor vehicle. In that case, suppliers expect a very limited
impact, if any at all, on administrative or other operational costs. As in the case of motor vehicles
manufacturers, the introduction of RFID technology across the sector, which – according to the RPA study may
cost in the range €115-790 billion– is not considered necessary. Only if the provision of individual serial
numbers for each component is made mandatory – under the extreme scenario - would costs of such a
magnitude arise. In this case, according to RPA calculations, certain subsectors that produce low cost
components (e.g. producers of light bulbs or wiper blades) could possibly face additional unit production costs
of up to 50%.
Similarly, in the case of tyre manufacturers, current practice is that all sidewalls of tyres bear a batch and type
number allowing them to be identified and this is considered by ETRMA to be sufficient for their full
traceability. Thus, there are no additional costs expected for the firms in the sector. Furthermore, while there
is no requirement for an individual tyre identification number in the EU this is a requirement under US
71
regulations and, according to ETRMA, similar provisions apply in a number of Latin American countries.
ETRMA members indicated that under the extreme scenario there will be significant investment costs for the
modification to the moulds used and would involve a few days of lost production. This would represent costs
amounting to millions of Euros for the industry, if not part of a planned stoppage of production.
In terms of possible benefits from the proposed measures on traceability, the RPA study makes reference to
costs savings from more effective recalls that could be at the level of multiple millions. However, all industry
representatives were doubtful about the potential for additional savings from reduced recall costs from the
introduction of additional traceability system. Furthermore, there is no additional benefit expected in terms of
a more efficient operation of the supply chain. The main argument from large size manufacturers is that the
existing systems are already sufficient. Small size firms (e.g. trailers, sport vehicles) indicated that costs of
recalls are rather small and the small volumes sold mean that the identification of vehicles with non-compliant
products is not costly.
Distributors and importers of vehicles and components

Our discussions with the representatives of associations in the retail and wholesale sector for vehicles suggests
that in this sector most non-EU manufacturers have their own authorised representatives that are responsible
for the import of vehicles. Only a few firms in the vehicles retail sector assume the responsibilities of
71
Every tire sold in the U.S. must have U.S. Department of Transportation (DOT) labeling. The first two
characters indicate the factory of manufacture, and the next five or six are manufacturer-specific jargon (for
tracking purposes, as in the case of a recall). The last four numbers give the date of production (the first two
indicate which of 52 weeks, and the second two, the year).
40

importers. Motor vehicle dealers – authorised or not – are mainly covered by the proposed requirements for
distributors. With their responsibilities as distributors, there appear to be rather different impacts for
authorised and independents dealers.
The representatives of authorised (franchised) dealers of vehicles (CECRA) indicated that the proposed
provisions for distributors – particularly in relation to the checking of products – will require the introduction
of IT systems to record their suppliers and customers and incur the costs of the human resources necessary.
CECRA representatives indicated that very few of their 380,000 members – primarily SMEs of 10-50 employees
- have the knowledge and resources to conduct the activities of monitoring and verification, other than
checking the presence of the necessary certificate of conformity. CECRA estimates that the proposed
provisions will lead to a possible increase of operational costs by over 5%, within a sector where profit margins
are nowadays not more than 2%. The costs will be even higher for a very small number of their members (no
specific number was provided) that also operate as importers of vehicles.
In contrast to authorised dealers, representatives of independent distributors of vehicles (dealers) (EAIVT)
suggested that they not expect their members to experience any noticeable impact from the proposed
provisions. Independent distributors expect that the important additional paperwork and checks will remain
with the manufacturers and their authorised representatives. A certain level of administrative work for record
management is expected to arise, in comparison to the existing practice of simply checking the presence of a
certificate of conformity. However, the firms in this sector have rather high profit margins - often above 10% -
and, according to the EAIVT representative, they do not consider that these requirements pose a significant
challenge.
In the case of spare parts and components, firms in the wholesale and retail sector operate as independent
importers and/or distributors of spare parts and components. The relevant industry association (FIGIEFA)
suggested that the proposed provisions should not lead to additional costs for their members as long as they
do not require the traceability of individual spare parts and components through an individual identification
number. Under Directive 2001/95/EC on general product safety (Article 5) there are already obligations
relating to product safety requirements and within the chain of responsibilities, distributors are required to
keep and provide the documentation necessary for tracing the origin of the product and informing competent
authorities in the event of an unsafe product. The current practice in the sub-sector is that parts and
components are traceable by batch number and the date of their supply to the wholesaler, distributor or
importer but individual components are not traceable in this way, since spare parts distribution generally
deals with a large quantity of parts. FIGIEFA representatives suggest that its members should be able to meet
the proposed requirements with limited additional costs, unless the traceability requirements require the
identification of individual components. If this were to be the case, there would be sizeable implications for
operating costs including one-off investment in new IT systems and equipment (hardware and software), and
longer term maintenance costs and costs associated with additional human resources. All this would have a
negative impact on profit margins. In the spare parts and components market, part of the costs would be
passed on to the final consumer, but they were not able to provide additional information as to the possible
impact on the market as a whole.
What can be said is that, in general, the prices of spare parts from the independent market are lower than
those from authorized dealers. The conclusion, therefore is that there would be a significant impact on the
spare parts and components market, only in the unlikely and extreme case that the provisions would require
the identification of individual components.
Impact on innovation and research
The discussion with industry representatives suggest that there is rather limited linkage between the proposed
measures and investment in research and innovation. Even when adopting a broader definition of innovation
41

72
that includes organisational or supply chain innovation large OEMs and large Tier 1 suppliers do not consider
that the proposed measures can have a significant impact on the adoption of a more systematic and
comprehensive approach to the management of the supply chain.
Having said that, an EU wide regulation that will promote a more advanced traceability system could lead to
increasing demand for traceability technologies and systems and may encourage further development work in
the RFID sector or possibly lead to the development of alternative technologies. The impact of the
Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act in the USA has not been
measured but it is the case that a number of suppliers of traceability systems make reference to it as a driver
73
of change in the traceability of components for the automotive sector .
Furthermore, a new regulation can provide the basis for the development of a common standard that will
facilitate the interoperability of the existing closed systems, possibly making use of the ODETTE
recommendation for the standardisation of traceability systems in the automotive sector. The proposed
requirements can possibly expedite this process
Impact on international competitiveness
According to the RPA study the introduction of traceability requirements may, through the expected reduction
of non-compliant products, enhance the reputation of the EU manufacturers for safe, compliant and high
quality automotive vehicles. However, the input of manufacturers is that while this may be an additional
element, the reputation of the EU manufacturers is already that of high quality.
In addition, the proposed measures can improve the competitive position of EU firms that incur costs in
ensuring that their products are compliant against suppliers of non-compliant products that, due to reduced
operational costs, compete unfairly on the basis of low prices. This applies primarily to the spare parts and
components market. The possible benefit for firms producing compliant products is from recouping a portion
of the losses generated by unfair competition which, as indicated earlier, represents a market value in the
range of €0.375-3 billion Euros annually. According to the RPA study, for instance, a moderate effectiveness in
the proposed measure (15% reduction of non-compliant products) could lead to a possible increase in the
market share and turnover for compliant manufacturers of spare parts and tyres in the range of €56 to €450
million per year (<1% of the annual sales of the aftermarket).
These estimates are, of course, highly uncertain, among other considerations, because of the questions
concerning the effectiveness of the measures. The discussions with industry representatives suggest that there
is some scepticism about the likely contribution of any additional measures. The better implementation of
existing provisions is considered to be more critical in addressing the issue of non-compliant products. Still, at
least for tyre manufacturers, the clearer involvement of distributors and importers is expected to make a
positive contribution to higher levels of compliance. .
Another possible benefit for suppliers of components is that the adoption of advanced traceability systems can
make them more competitive in winning contracts with large OEMs or Tier 1 suppliers. The discussions with
manufacturers suggest that this is a theoretical possibility but, it is pointed out, traceability systems are
already a common practice in large parts of the automotive supply chain.
On the other hand, under the extreme scenario EU manufacturers may be disadvantaged in relation to their
non-EU competitors when accessing the markets of third countries particularly in the markets of emerging
economies where such requirements are not present. There would be increased operational costs for
72
According to the OECD, organisation innovation is implementation of a new organisational method in the
firm’s business practices, workplace organisation or external relations. Supply chain innovation includes the
sourcing of input products from suppliers and the delivery of output products to customers.
(http://stats.oecd.org/glossary/detail.asp?ID=6873)
73
Martin,B., (2012), Unleash the Value of Traceability Data,
http://www.teradatamagazine.com/v12n03/Viewpoints/Unleash-the-Value-of-Traceability-Data/
42

component manufacturers – for those parts that do not already use advanced traceability systems and this
would make them less competitive. .
Overall, the impacts of the proposed provisions on the competitiveness of the EU automotive sector are
limited unless the extreme scenario of demanding traceability requirements is adopted. Even then, only those
segments of the industry that do not already use such approaches will be affected, - mainly the manufacturers
of smaller value components and spare parts. Furthermore, to the extent that traceability requirements are
made applicable at a broader level any negative impacts would be mitigated.
The following table summarises the analysis of the proposed regulatory policy option in relation to the
problem area A.
43
Tasking for Competitiveness Proofing: Ex-ante evaluation of competitiveness impacts of identified options for a Commission's policy
Section
proposal on the Review of Directive 2007/46/EC relating to the approval of motor vehicles

Affected sectors Direct- Impact expected/identified Size of impact Duration of Risks/uncertainty
indirect impact of assessment
Impacts on costs of doing business
Manufacturers of Direct OEMs manufacturers should be able to comply with requirements with Limited/Zero Short term Low
vehicles (OEMs) current systems in place – No sizeable/measurable impact expected
Efficiency savings and improvement in management of supply chain
not expected/limited - Not expect recall savings
Manufacturers of Direct Most manufacturers should be able to comply with requirements with Limited/Zero Short term Low
sport vehicles in small current systems in place – No sizeable/measurable impact expected
series Not expect recall savings due to small volumes, not frequent, direct
knowledge of customers
Manufacturers of Direct Most manufacturers should already comply with requirements using Limited Short/Medium Low
trailers and other existing systems term
special purpose Not expect recall savings due to small volumes, not frequent, direct
vehicles knowledge of customers
Some SMEs may need to introduce more organised documentation
(administrative costs) – Possible small increase of administrative costs
Manufacturers of Direct All manufacturers should be able to comply with requirements with Limited Short term Low
components (Tier 1) current systems in place – No sizeable/measurable impact expected
Efficiency savings and improvement in management of supply chain
not expected/limited - Not expect recall savings
Manufacturers of Direct Limited/zero impacts on costs: All manufacturers should be able to Limited Short term Low
tyres comply with traceability and information collection requirements with
the current systems in place (tyres already bear a serial number)
Measurable one-off costs in the case of additional information
requirements (not expected)
Additional efficiency savings and improvement in management of
supply chain not expected/limited – already information in place
Small recall costs savings could arise if requirement to distributors and
importers are properly enforced to ensure that only compliant
products are sold
44
Section

Manufacturers of Direct Possible costs for adoption/extension of product traceability systems Medium Short/medium Medium/High
components (Tier (equipment and maintenance) term
2&3)
Authorised Direct Possibly sizeable additional administrative costs for managing Medium Short/medium Medium
Distributors/Dealers information - Costs for introduction and operation of traceability term
of vehicles systems and record management procedures
Independent dealers Direct Expected to maintain a limited role in process Limited Long term Low
of vehicles Very limited administrative costs expected
Importers/distributors Direct Requirement for proof of compliance will have some limited Limited Long term Medium (depends
of tyres administrative costs for some distributors (already being done by on whether
many) requirements for
Possible sizeable costs (equipment, resources or fees to external labs) testing will apply)
if requirements for testing of products for importers apply (considered
of low probability)
Spare parts dealers Direct Limited costs if information limited to batch, production series level Medium/High Long term Medium/Low
Sizeable additional administrative costs for managing information and
introduction and operation of IT systems if individual product
traceability required
Requirement for proof of compliance will have some limited
administrative costs for some distributors (already being done by
many)
Manufacturers of Direct Limited contribution expected at this stage - Potential for improving Limited Medium/Long Medium
vehicles & organisational and supply chain innovation not linked with the term
components requirements – Large OEMs already look into ways to improve supply
chain and cut costs
Importers/distributors Direct None expected unless “Forced” to adopt traceability systems – Limited (unless Medium/Long Low (probability of
organisational innovation "forced" term requirement for
introduction of IT introduction of IT
45
Section

based traceability based traceability
requirements) requirements
limited)
Suppliers of Indirect Possible increase market demand for traceability systems and Limited (Sizeable if Medium/Long Low (probability of
traceability systems incentive to innovation "forced" term requirement for
Contribution to the development of common standard for traceability introduction of IT introduction of IT
systems based traceability based traceability
requirements) requirements
limited)
EU manufacturers of Indirect Potential: Reduce/eliminate part of non-compliant products from EU Limited Long term High (actual impact
vehicles market – level playing field (not real issue) is uncertain- non-EU
Not expected to have a significant additional impact on the reputation firms will also
of EU firms respond)
EU manufacturers of Indirect Potential: Reduce/eliminate part of non-compliant products with Low (only Long term Low (probability of
components and tyres lower prices from EU market – level playing field significant if requirement for
Cost disadvantage for EU manufacturers if additional requirements (if "forced" introduction of IT
introduced) are not evenly enforced to EU and non-EU manufacturers introduction of IT based traceability
based traceability requirements
requirements) limited)(response of
non-EU firms and
enforcement are
uncertain)
EU manufacturers of Indirect Introduction of full traceability capacity to provide a competitive Limited Medium/Long Low (probability of
components at Tier 2 advantage to suppliers of components (however, already demanded term requirement for
and 3 from main manufacturers) introduction of IT
based traceability
requirements
limited).
46

3.2 - Attention area B: Responsibilities and cooperation of enforcement authorities
Problem definition and policy measures proposed
The lack of a clear definition of these roles inhibits the contribution of these organisations to the effective
enforcement of the legislation. There are no clear mechanisms and procedures established in the legislation
for information exchange and co-operation between enforcement authorities, either at a national or EU level.
The policy option examined was an amendment of Directive 2007/46/EC to clarify the roles and
responsibilities of enforcement authorities including:
 ensuring that they have the means, resources and the necessary authority;
 ensuring co-ordination between authorities;
 drawing up, organising and carrying out national programmes;
 co-operating with other Member States;
 bringing the customs and market surveillance authorities closer together;
 co-ordinating activities at national and European (EU and EEA) levels.
Under the NLF framework changes to the legislation would aim to clarify the roles and responsibilities of
enforcement authorities and enhance the exchange of information and co-operation between national
authorities. More specifically it could include:
 national accreditation bodies co-ordinated via the European Co-operation for Accreditation system - the
organisations that will also be responsible for the peer evaluation of national accreditation bodies;
 the market surveillance authorities, via the existing mechanisms such as RAPEX and ICSMS, TCMV, TAAEG
and TAAM, as well as the proposed general information support system and information provided by
border controls on products which have been suspended from circulation;
 the border control agencies, via communications between them and market surveillance bodies.
 Better information exchange and co-operation will assist Member States in correctly applying (and
enforcing) the Directive and reducing differences in enforcement approaches across Member States, in so
doing, enhancing the functioning of the Internal Market.
In the case of the Regulation 168/2013 on the approval and market surveillance of two or three wheeled
vehicle (Motorcycles Regulation), which could be considered as a possible benchmark, there are direct
references to most of the relevant articles of the NLF. The basic difference is that the NLF provisions have
been adapted to take into account the role of the type approval authorities and clearly state that the
responsibility for the compliance of the automotive products remains with the type-approval authority.
Type approval authorities should be consulted by market surveillance authorities and are expected to take
remedial action whenever a market surveillance authority in another Member State has found an
automotive product that is non-compliant or represents a serious risk. We consider that similar provisions
will be adopted in the case of the Motor Vehicles Type Approval Framework and this is also supported by
the analysis made in the Discussion note for the meeting of the Technical Committee for Motor Vehicles
74
of 26/3/2010 .
74
EC (2010), Discussion note for the TCMV meeting of 26 March 2010,
47

Analysis of impacts
Sectors affected
The proposed provisions are not expected to have a direct impact on any of the segments of the automotive
sector. Indirectly, all segments of the market will be affected by measures that may make market surveillance
more effective. However, given that the main areas of concern in relation to non-compliant products are spare
parts and tyres, these are the sectors that are expected to be mostly affected by the proposed measures.
Impact on Costs and price competitiveness
Economic operators – manufacturers, distributors and importers,– are not expected to be directly affected by
the proposed measures. The provisions are mainly expected to have an impact on enforcement authorities.
Any increase in operating costs will only arise for non-compliant manufacturers that will need to undertake
measures to ensure compliance or, possibly, exit the market.
It has not been possible to identify any direct impact of the proposed policy option on research and
development activity and innovation in the automotive sector. The RPA study suggests that co-operation
between national authorities may operate as a knowledge creation mechanism, leading to identification of
new potential areas of research which can then be pursued by economic operators and other stakeholders at
an individual basis or at an EU level (joint R&D projects). The industry representatives did not dismiss this
possibility but did not consider it to be a significant factor in the development of innovation in the sector, at
least in the short to medium term.
EU manufacturers expect that a better information exchange and co-operation amongst national authorities
should lead to a reduction of unfair competition from non compliant products entering the market, even
though its effectiveness is not possible to assess. The RPA study estimated a potential reduction in the market
value of non-compliant products spare parts and tyres – of €19-63 million (not more than 0.5% of the market)
which would primarily benefit those EU manufacturers of spare parts that produce compliant products.
Suppliers of non-compliant products – generally assumed to come from third countries - will be discouraged
from bringing such components to the EU.
The industry representatives interviewed did not consider that there would be significant benefits in terms of
access to non-EU markets. The RPA study suggested that, by addressing the presence of non-compliant
products on the market and protecting the reputation of the EU for safe, compliant and high quality
automotive vehicles, this will enhance the global competitive position of EU firms. EU manufacturers argue
that, in general, the automotive sector has a strong reputation in that respect and that quality and safety are
key selling points. The proposed measures, while positive, are not expected to make a significant additional
contribution.
problem area B.
48
Section

Affected sectors Direct/Indirect Impact expected/identified Size Duration of impact Risk/uncertainty of
assessment
None identified
Manufacturers of No impact expected Limited Long term Low
vehicles and Potential contribution from exchange of knowledge with
components authorities limited
Manufacturers of Direct Eliminate/reduce competition from non-compliant Limited Short/Medium term Low (non-compliance
vehicles products/manufacturers within the EU : only marginal in the not an issue for
case of vehicles vehicles)
Manufacturers of Direct Eliminate/reduce competition from non-compliant Small Short/Medium term Medium
components/spare products/manufacturers for certain categories of (Depends on
parts components – increase market shares inside the EU effectiveness of
mechanisms and of
national authorities)
Manufacturers of Direct Eliminate/reduce competition from non-compliant Small Short/Medium term Medium
tyres products/manufacturers (mainly non-EU?) – increase market (Depends on
shares inside the EU effectiveness of
mechanisms and of
national authorities)
49

3.3 - Attention area C: Quality and performance of Technical Services
Problem definition and baseline
According to the RPA study there are around 250 Technical Services most of which are involved in type-
approval testing and in the verification of the Conformity of Production (CoP) of other products, as well as of
vehicles and vehicle devices. The Technical Services market includes a few large Technical Services with a
presence – through subsidiaries - in multiple countries covering the full range of testing required by the type
approval legal framework and a larger number of small more specialised Technical Services that often have a
more limited scope (e.g. a focus on Electromagnetic Compatibility) and concentrate on specific national
markets. In many countries there are also subsidiaries of the large Technical Services that compete with
smaller public or private testing laboratories. Unfortunately, there are no specific statistics available on the
size of the market of the different segments. The review of the list of Technical Services in each country
suggests that around 40-50% of the Technical Services are subsidiary units of the large Technical Services.
There is also a number of category B Technical Services that do not have their own facilities but only supervise
the tests referred to in the 2007/46/EC Directive and in the relevant regulatory acts performed in the
manufacturer’s facilities or in the facilities of a third party (Witness testing). This approach is also often
followed by the large Technical Services in the case of overseas manufacturers. Furthermore, Technical
Services vary in terms of their ownership structure including private entities and government laboratories.
Particularly in the case of the testing for tyres Technical Services are almost exclusively accredited in-house
bodies of the manufacturers and making use of the manufacturers’ facilities.
While some Technical Services focus exclusively on type approval services, many are also involved in the
design, manufacture, supply installation, use or maintenance of the vehicles and/or devices they test. Around
half of the Technical Services responding to the survey questionnaire of the RPA study confirmed that they are
aware of other Technical Services that undertake these activities. Thus, some Technical Services consist of a
number of departments, including an engineering department which may be involved in the design or
development of a product, a testing department that conducts product testing and a certification department
which only becomes involved at the type-approval and verification of CoP stage. However, in the case of small
size Technical Services the type approval and the consulting activities may be performed by the same person(s)
within a single unit.
The effectiveness of Directive 2007/46/EC and the overall automotive legal framework relies significantly on
the quality and performance of Technical Services. A number of studies (Fitness Check, RPA evaluation) have
pointed to problems of quality and consistency in the Technical Services and this is a view that is generally
supported by national authorities and most economic operators. Furthermore, 60% of all respondents to the
75
public consultation organised by the Commission stated that the quality and performance of Technical
Services vary considerably and that could be improved by strengthening the quality criteria in the current legal
framework. Concerns about the independence of Technical Services from manufacturers and the possible
conflicts of interest that can arise in a rather competitive market were also expressed during our discussions
with two large Technical Services. There is a danger that in some cases Technical Services may have an
incentive not to be stringent in cases of non-compliance, if they are dependent on a small number of
contracts.
On the other hand, there are already certain provisions concerning the operation of Technical Services in the
Framework Directive. Appendix 2 in Annex V states that “Assessing [of Technical Services] shall be
characterised by reliance on a number of principles: — independence which is the basis for the impartiality and
objectivity of the conclusions”. Furthermore, according to Article 41 “Technical Services shall comply with the
standards listed in Appendix 1 to Annex V which are relevant for the activities they carry out”. These include
75
EC (2010), Consultation on enhancing the implementation of the internal market for motor vehicles,
market/index_en.htm
50

references to specific ISO 17000 series standards depending on the category of technical service (see Table
below).
Table 3.1 – Category of technical service and ISO standards indicated in the Framework Directive
Activities related to testing for type-approval Standard
Category A (tests performed in own facilities) EN ISO/IEC 17025:2005 on the general
requirements for the competence of
testing and calibration laboratories
Category B (supervising of tests performed in the manufacturer’s EN ISO/IEC 17020:2004 on the general
facilities or in the facilities of a third party): criteria for the operation of various
types of bodies performing inspection
Activities related to Conformity of Production
Category C (procedure for the Initial Assessment and surveillance EN ISO/IEC 17021:2006 on the
audits of the manufacturer’s quality management system): requirements for bodies providing audit
and certification of management
systems.
Category D (inspection or testing of production samples or EN ISO/IEC 17020:2004 on the general
supervision thereof) criteria for the operation of various
types of bodies performing inspection
Furthermore, at the national level, Member States adopt a different approach in terms of mandatory
76
accreditation. Some national type-approval authorities (e.g. UK, Spain, Austria) require accreditation based
on ISO standards (ISO 17025 and ISO 17020 as relevant) as a condition for accreditation. Others simply require
an ‘ISO 17025 equivalent operation without full accreditation’.
In relation to the question of technical and financial independence, ISO17025 includes an explicit requirement
that, where the laboratory is part of an organisation which performs activities other than testing and/or
calibration, the responsibilities of all staff in the organisation who have influence on the testing/calibration
77
work are defined in order to identify potential conflicts of interest . It has not been possible to establish
whether this is a more general trend and whether more Member States are expected to make full
accreditation of Technical Services mandatory. The NLF itself does not make accreditation mandatory but it is
indeed possible accreditation may become more widespread in the future as a result of developments at
Member State level.
The examined policy measures would adopt the NLF provisions in Directive 2007/46/EC to:
 strengthen the criteria for technical independence of Technical Services - Technical Services should be
independent of the organisation or the product it assesses and shall not engage in any activity that may
conflict with their independence of judgment or integrity in relation to conformity assessment activities
for which they are notified, including the provisions of consultancy services. The top management or the
people involved in the conformity assessment are not allowed to be the designer, manufacturer, supplier,
installer, purchaser, owner, user or maintainer of the vehicles or devices tested. They shall ensure that the
activities of their subsidiaries or subcontractors do not affect the confidentiality, objectivity or impartiality
of their conformity assessment activities.
76
A complete list of countries that require accreditation of technical services based on ISO standards was not
available.
77
UNIDO (2009), Complying with ISO 17025 - A practical guidebook for meeting the requirements of laboratory
accreditation schemes based on ISO 17025:2005 or equivalent national standards
http://www.unido.org/fileadmin/user_media/Publications/Pub_free/Complying_with_ISO_17025_A_practical
_guidebook.pdf
51

 strengthen the criteria for financial independence of Technical Services - The remuneration of the top
level management and assessment personnel is not to depend on the number of assessments carried out
or on the results of those assessments.
● In parallel, following the NLF provisions for notified bodies (Article R30 of Decision 768/2008), Technical
Services may be required to participate in a Technical Services coordination group and, in this way, be
informed by market surveillance authorities about products that do not comply with the legislative
requirements and for which economic operators have been asked to take appropriate corrective action;
We should note that not all provisions in the NLF were integrated into the recent Regulation 168/2013 for the
type approval and market surveillance of motor cycles. More specifically, no provisions concerning financial
independence linking remuneration with the number of assessments has been included in the Regulation.
Analysis of impacts
Sectors affected
The analysis of the provisions on Technical Services and the discussion with stakeholders indicate that the
following sector may be affected by the adoption of the proposed provisions.
 Some Technical Services may be directly affected by having to introduce changes to their structures to
comply with the new requirements and adopt the relevant ISO standards;
 manufacturers of tyres that operate in-house accreditation bodies will also need to introduce changes to
the existing structures to meet the proposed requirements;
 manufacturers of vehicles and components that make use of Technical Services that may be indirectly
affected by increased Technical Services fees
As indicated in the RPA study, the 250 Technical Services currently operating in the market may follow
different strategies to ensure compliance with the proposed requirements. Organisational separation –
separation of personnel and the creation of units exclusively dealing with Technical services provision within
the same organisation- or legal separation – creating a different legal entity exclusively providing Technical
Services - are considered to be the most plausible option. A physical separation of the technical services –
which would require type approval activities and other functions to be performed in different facilities - is
considered a much more demanding but unlikely interpretation of the provisions..
An organisational separation of personnel is the approach that is already followed by the large Technical
Services. These have established separate departments, which are responsible for conformity and procedures
to ensure that there is no overlap with the engineering units offering technical advice. The one-off costs for
Technical Services that will need to adapt their organisational structures were estimated by RPA to be €150-
1,500 each for around 200 of the 250 Technical Services that do not have such structures already in place.
Smaller Technical Services are expected to be the ones that will mostly need to adopt such measures. For
these Technical Services such restructuring may prove particularly challenging since most often the same
person performs type approval and provides consulting services. Thus, it is logical to expect that some of them
may decide to stop offering one of the two types of services, the provision of technical services or the
engineering consultancy, rather than hiring additional personnel. However, it has not been possible within the
context of the study to collect the necessary information in order to assess of the number of Technical Services
that may be in such a situation. As a result, we are unable to the estimate the possible impact of this measure.
A legal separation of the various functions of Technical Services is the option supported by the requirements of
the non-mandatory ISO 17065 standard. This would entail some initial costs (solicitors, accountant fees and
other associated costs for registering a new company name). These are estimated by RPA to be around
€20,000 per Technical Services on average with a total one-off cost of around €2 million for an estimated total
of 100 Technical Services (40% of the total) that would have to undertake such action. Large size Technical
Services would probably need to spend more, but it is also typically the case that the large Technical Service
52

already follow the ISO standard provisions. To the extent that adoption of the ISO standard becomes a de facto
requirement for accreditation, the additional costs for Technical Services would probably be rather small, with
annual audit costs estimated to be around €2,000 - €3,000 per year for each Technical Service with initial costs
78
of up to €10,000 depending on size . Since we do not have information on the actual number of small and
large Technical Services it is not possible to assess what proportion would be more affected by such a
requirement.
Finally, under the unlikely scenario of a much stricter interpretation of the requirements for independence a
physical separation of the certification function from other functions carried out by test houses would be
necessary. Such an approach would mean that even large Technical Services would need to invest in separate
building and testing facilities. It would also result in testing facilities becoming less utilised affecting the cost of
capital and the expected return on investment. The RPA study estimated that additional one-off investment
costs could be more than €300,000 per Technical Service with additional maintenance costs which some small
Technical Services may not be able to cover. As already indicated, the analysis of the way the NLF provisions
have been reflected in the Motorcycles Regulation (168/2013) does not suggest that a physical separation will
be required. As a result, this option should be considered as an extreme, and highly unlikely, scenario.
In relation to the in-house accredited bodies (Technical Services) that are the common form in the tyre
industry, the feedback from ETRMA is that the current requirement that they should “constitute a separate
and distinct part of the undertaking and shall not participate in the design, production, supply, installation, use
or maintenance of the products it assesses” is already met. All in-house Technical Services in the tyres sector
follow the standard ISO17025 to ensure their independence from activities that may adversely affect their
independence and it was asserted that they all have the necessary organisational structures. Only the unlikely
scenario of physical separation would entail sizeable investment costs (in the range of many millions) for the
creation of additional testing facilities of the type that are currently used both for product development and
type approval testing. According to ETRMA such a scenario would have a sizeable and negative impacts on
profit margins for manufacturers of tyres although it has not be possible to establish if they would be able to
pass on the costs to the final consumer in the form of higher prices for tyres.
Additional costs may also arise from the participation in the Technical Services Coordination Group structures
(in the form of travelling, time, possibly fees for participation etc.). There is no information concerning the
possible costs of operation such co-ordination groups. Existing notified groups for other pieces of IM
79
legislation typically include a small secretariat working part-time to provide information on issues of
relevance, the support necessary for an electronic information exchange system, meetings and possibly
working groups to examine relevant issues and produce "Technical sheets for coordination" that report the
80
common position of the Notified Bodies . The costs of the operation of such structures – depending on the
level of sophistication – may range from a few thousand Euros per annum to more than a €100,000. Annual
fees for participation in the rather well development Medical Devices Directive NB Groups are in the range of
€2,300-4,500, to which should be added the costs for members travelling. Such additional costs are minor for
the large Technical Services but, in relative terms, probably significant for the small size Technical Services with
a more limited scope for countervailing gains in terms of the aspects covered (e.g. they may only be interested
in Electromagnetic Compatibility) or for those that only perform witness testing and do not have their own
facilities.
In terms of the possible benefits, there were concerns that since Technical Services are competing against each
other it may not be appropriate to create such a co-ordination structure. However, similar structures are
78
Law, Stanely (n.d.), ISO 17025 - Testing and Calibration of Laboratories -
Business and Quality Management, http://www.standards.org/standards/listing/iso_17025#TOC_Costs
79 Medical Devices http://www.team-nb.org/?q=node/1; http://www.rtteca.com/index.htm
80 See example of NB for Personal protective equipment:
http://ec.europa.eu/enterprise/sectors/mechanical/documents/legislation/personal-protective-
equipment/notified-bodies/index_en.htm
53

already in place in other areas without any actual concerns raised. Furthermore, at least according to the
Technical Services interviewed such a structure could help by providing a fast response to issues of practical
implementation or interpretation of requirements and contribute to increased consistency.
Manufacturers of vehicles and components may be indirectly affected by any increase of operational costs
for Technical Services. The discussions with Technical Services and the industry associations suggest that
within the EU there is still rather limited competition among Technical Services and, generally, increases in
their operational costs can be passed on to their clients – the manufacturers of vehicles and components.
Most manufacturers tend to use Technical Services in a few countries with which they have established long
term relationships and with which they have long experience of co-operation. This is quite different outside
the EU, where competition between Technical Services is much more intensive and Technical Services have to
absorb costs to remain competitive
Having said that, manufacturers do not appear to be particularly concerned about increases in the fees of
Technical Services since these usually represent a minor part of the total costs of operation. Even for smaller
size manufacturers of trailers and semi-trailers, the representatives considered that the impact on operational
costs will be minor (increase slightly). Data collected in the context of the Fitness Check study suggest that
Technical Services fees represent no more than 0.01% of total annual turnover even in the case of small size
and volume producers in the trailer and semi-trailer sector. With current profit margins at around 4% - an
increase in the fees of Technical Services by 5-10% should not be expected to have a significant impact on the
costs of operation for most firms.
Furthermore, in relation to the “no action” scenario, the RPA study estimated that clarifying the
responsibilities of Technical Services and ensuring that there is a uniform level of stringency in type-approval
testing could lead to a reduction of 5% and 20% in the total number of recalls on an annual basis. The cost
savings for vehicle manufacturers, mainly the large OEMs with a large volume of vehicles, were estimated to
be in the range of €3 million to €113 million.
Summarising, the analysis of the proposed requirements under Policy area C concerning the independence of
the Technical Services suggests that, under the dominant scenario of organisational separation of personnel
and reorganisation of some Technical Services, the expected costs for those Technical Services that have
already adopted the ISO standard – most typically the large ones - will be close to zero. Other Technical
Services – particularly smaller ones – will face certain costs for reorganisation. The costs of this process will
most probably be passed on to manufacturers of vehicles and components but they represent a very small
part of the total costs of operation. In some cases it may also lead them to a decision to stop providing
Technical Services. However, in the course of this basis study, it has not been possible to collect the necessary
information in order to assess the probability and the number of Technical Services that may take this
decision. . .
The discussion with Technical Services suggests that in certain cases the requirements for personnel
separation could have a negative impact on the transfer of knowledge among the departments working on
type approval related testing and those providing product design and other consultancy services. Nonetheless,
their clients, the manufacturers of vehicles and components, can still make use of the knowledge developed in
one activity – type approval testing – for product development. In general, this loss of knowledge was not seen
as a particular concern for any of the providers of technical services or the manufacturers.
To the extent that the proposed policy options will contribute to a more consistent implementation of the type
approval legal framework and reduce the possibility of flexible interpretation of the requirements,
manufacturers that are in compliance with the requirements will benefit from a level playing field. In the RPA
study it was estimated that, if effective, the proposed measure would contribute to a reduction of non-
compliant devices of a value of around €125 million per year. A lower level of effectiveness could still generate
a reduction of non-compliant devices of around €38 million per year. The Fitness Check study found that it is
54

mainly the spare parts sector and tyres where non-compliant products may arise and, these are usually
produced by non-EU manufacturers that tend to use Technical Services outside the EU. Consequently, such a
reduction may contribute towards a more level playing field for EU manufacturers of components and parts
against manufacturers that can benefit from the less strict approach followed by Technical Services that
operate in non-EU countries.
The strengthening of the criteria may operate as a deterrent to the entry of new Technical Service providers
from outside the EU. However, there has been no evidence found of such an interest and, so far, the specific
market remains dominated by EU firms.
problem area C.
55
Section

Affected sectors Direct/ Impact expected/identified Size of impact Duration of Risk/uncertainty
Indirect impact of assessment
Technical Direct Costs for restructuring and adoption of ISO standards for Technical Services Moderate Short/ Medium (unclear
Services Increase in operational costs for some – mainly small size - TS medium share of small size
Possibility (not quantified) that some small TS may decide to stop offering term TS and which part
type approval services if the costs of meeting the requirements of may stop
independence are not considered justified providing services)
Sizeable costs if strict physical separation required (highly unlikely scenario)
Manufacturers of Direct No costs under the dominant scenario. Limited/Zero Short/ Low/Medium
tyres Costs for restructuring for in-house TS for tyres medium
Sizeable costs in case that more demanding physical separation is required term
( highly unlikely scenario )
Possible pass of costs to consumers through increased prices
Manufacturers of Indirect Increase of operational costs through the increase of fees to Technical Limited/Zero Short/mediu Medium
vehicles and Services. Limited impact on operational costs for OEMs m term
components More important in relative terms for SMEs but still limited
Technical Direct Possible loss of transfer of experience between conformity assessment and Limited/Zero Medium/Lo Low
Services product design ng term
Manufacturers of Direct Possible loss of transfer of experience between conformity assessment and Limited/Zero Medium/Lo Medium
tyres product design ng term
More significant if strict physical separation (highly unlikely scenario)
Manufacturers of Indirect Possible reduction of competition from non-compliant products – level Limited Medium Low
vehicles playing field (limited occurrence of non compliance) term
Manufacturers of Indirect Possible reduction of competition from non-compliant products – ensure Moderate Medium Medium (depends
components level playing field and possible market share gains term on effectiveness)
Manufacturers of Indirect Possible reduction of competition from non-compliant products – level Limited (independence Medium Medium (depends
tyres playing field – ensure level playing field and possible market share gains of TS not the reason term on effectiveness)
for non-compliance)
Technical Direct Strengthening of quality as a selling point for accessing non-EU market Limited Medium/Lo Low
56
Section

Services ng term
57

3.4 - Attention area D: Post-market safeguard measures and recalls
Problem definition
In relation to post-market safeguard measures and recalls, the policy issue examined is the need to simplify
the current procedures for dealing with products presenting a risk at a national level only.
Currently, according to Article 30 of the Framework Directive, if a Member State which has granted an EC type-
approval finds that new vehicles, systems, components or separate technical units accompanied by a
certificate of conformity or bearing an approval mark do not conform to the type approved, it shall take the
necessary measures, including, where necessary, the withdrawal of type-approval. The approval authority of
that Member State shall advise the approval authorities of the other Member States of the measures taken.
However, as the Commission Services have confirmed, the current practice under Article 30 is that the only
mechanism in operation is the bilateral interaction between two Member States - the Member State that finds
the non-compliant product on its market and the Member State that has issued the type-approval for the
product concerned. The Commission is informed if there is a dispute. Thus, it is often the case that there are
no measures taken for the same deficient products placed on the markets of the other Member States.
Specific concerns about the co-ordination of recalls were also identified in the Fitness Check. The absence of a
standard procedure across the EU for recall actions and the fact that different procedures and criteria are
being adopted by different Member States were the main point of concern. It was reported that vehicles may
be recalled in one country but not in others and that the process can be rather slow and complicated in
situations where a type approval has been initially granted in another Member State. This situation is seen as
potentially leading to problems in ensuring common minimum levels of consumer protection and health and
safety standards across the EU.
Having said that, the RPA study also found that most stakeholders consider these issues are of less significance
than the other areas under consideration. The majority of respondents to the public consultation exercise did
not know whether existing safeguard procedures are effective or could be improved. Over 25% stated that the
existing procedures for the recall of automotive products in the current legal system are sufficiently clear and
effective, over 20% think they are not. Among the respondents to the survey organised by RPA, consumer
organisations responding to the ex-post evaluation questionnaire indicated that this area is ‘highly
problematic’, but half of the national authorities (6 of 11) considered it ‘not an important problem’.
The envisaged policy option includes the introduction of a two-step approach to safeguard measures in line
with the principles of the NLF Decision 768/2008/EC. This means that not all cases would have to be dealt with
under the comprehensive procedure at EU level. Member States (or their respective approval authorities) will
be required to inform the Commission and other Member States of actions taken where the approval
authorities consider that non-conformity is not restricted to their national territory. If objections are raised
against a measure taken by a Member State, or where the Commission considers a national measure to be
contrary to Union legislation, the Commission is required to evaluate the national measure, after consulting
Member States and the relevant economic operator or operators, and decide whether the national measure is
considered justified or not.
The review of the Motorcycles Regulation suggests that the relevant provisions in the NLF have been fully
integrated into the legislation with no substantive differences (Annex C).
Analysis of impacts
Sectors affected
The proposed measures may have implications for manufacturers of vehicles and components and on their
distributors.
58

The proposed two-step approach does not lead to costs to manufacturers and other economic operators
unless measures taken by a specific Member State at the national level are considered unjustified and end up
being challenged by the Commission Services or other Member States. In that case, there are possible
avoidable recall costs for economic operators if a national measure is eventually considered unjustified. In
contrast, where national measures are not challenged there will be no additional costs arising.
The industry associations that contributed to the study could not provide estimates for the possible costs
arising under this scenario, given the very high level of uncertainty relating to the provisiosn. According to the
81
RPA study the costs to vehicle manufacturers (OEMs) from a possible recall is €100-250 per vehicle and each
recall incident typically involves around 30,000 vehicles across the EU – around 4,000 for the large Member
States (Germany, France, Italy, Spain, UK) and 9,000 for all others. On that basis, we can estimate that the
avoidable costs for OEMs as a result of a recall in one Member State that may be eventually reversed may be
in the range of €400,000-1,000,000 in the case of large Member States and €40,000-€100,000 for smaller
Member States. Such costs represent no more than 0.1% of the annual turnover for large OEMs. In the case of
smaller firms – such as producers of sports cars or trailers - that sell a few thousand units per year, a recall of
the equivalent of 10% of the annual production from a single Member State will still not represent more than
0.01% of annual turnover (assuming the same recall costs of €100-250/unit). These costs may also be shared
with the producers of the relevant components that may be the reason for non- compliance.
However, it is not possible to assess the probability of such national measures being taken. Manufacturers,
would regard it as unusual for non-compliance to be limited a single Member State. Most vehicles produced by
the large OEMs and but also components and tyres are usually sold across a number of EU Member States.
Incidents of non-compliance are, in principle, expected to have consequences across the EU market. As a
result, all industry representatives regard the possibility that measures would be taken only in a single
82 83
Member State as rather limited. A brief review of the RAPEX data for the period 2009-2013 also suggests
that, in the majority of cases, measures – in the form of a recall or other corrective action -are taken by more
than 3 more countries but more than 50% of the time by more than six other Member States. In contrast, we
found only 13 cases during the same period when measures were not taken in any other Member State (2.6%
of total). Taking also into consideration that in most cases the notifications concern specific production
batches (during a specific period and from specific production plants) we consider that this is evidence that in
84
most cases problems extend beyond individual Member States, even if they refer to the whole of the EU .
81
It should be noted though that not all national measures may lead to a recall of vehicles since other
corrective action may also be considered appropriate
82
http://ec.europa.eu/consumers/safety/rapex/alerts/main/index.cfm?event=main.listNotifications
83
We focused on passenger car notifications that represent more than 60% of the total number of
notifications.
84
Once should also consider that not all vehicle models are sold in all EU countries and that certain
manufacturers – especially among sports/luxury cars are only present is some EU Member States.
59

Table 3.2 – RAPEX notifications for passenger cars and frequency of action by other Member States (Period
2009-2013)
Total number of measures taken in at least 3 measures taken in at least 6
notifications more MS more MS
Number % of total Number % of total
2013 60 45 75% 33 55%
2012 99 88 89% 59 60%
2011 111 97 87% 80 72%
2010 128 113 88% 101 79%
2009 87 67 77% 39 45%
. Source :RAPEX database and own elaboration
At the same time, this could also be considered to be an indication that if Member States take controversial
measures, there is a great probability that, under the two step procedure, they will be challenged. It has not
been possible to make any assessment of the probability that such action would take place nor can we predict
how Member States will act – in terms of more or less national measures taking place - once the specific policy
measure is adopted.
We consider that the two step approach appears more relevant in the case of vehicles approved under the
national small series regime. Indeed, for vehicles approved under this scheme which are manufactured for
individual national markets, there is no reason to inform other Member States and most probably no need for
the Commission services to challenge such decisions. However, as has been found in the Fitness Check study
the use of national small series scheme remains, quite limited, so far at least. In addition, in the case of certain
categories of vehicle (such as trailers and semitrailers) where the markets are still largely national, measures
by individual Member States are less likely to be challenged by other Member States.
We cannot identify any direct impacts on innovation and R&D activity from the proposed measures. Industry
representatives did not consider that there is any evident linkage. What can be said is that any possible
uncertainty arising from the situation presented above could lead to an environment that is not conducive to
innovation. It is not possible to make any assessment of the possible impact but it is difficult to envisage that
the specific measure can have a significant impact on the innovation activity of manufacturers.
The proposed policy measures are not seen by industry representatives as leading to any relocation of
economic activity or direct cross-border investment flows or to lead to trade barriers. Even though decreasing
in relative terms, the weight of the EU market is still significant and represents the driving force behind any
such choices.
It is only if any of the EU Member States with a small market applies a national procedure on a continuous
basis that manufacturers may be discouraged from placing such vehicles or components on these markets in
order to avoid uncertainty leading to differences in intra-EU trade flows and jeopardize the operation and the
benefits of the single market.
problem area D.
60
Section

Affected sectors Direct/Indirect Impact expected/identified Size of impact Duration of impact Risk/uncertainty of
assessment
Manufacturers of vehicles Indirect Avoidable costs from recalls or Limited Long term Medium (uncertain
and components other actions in specific Member (periodically) reaction from the side of
States MS)
Manufacturers of tyres Indirect Avoidable costs from recalls or Limited () Long term Medium (uncertain
other actions in specific Member (periodically) reaction from the side of
States MS)
All sectors Indirect Uncertainty in terms of action at Limited (since most Long term High (unclear nature of
national level may be considered to products sold across measures and reaction)
be not supportive for introducing EU)
innovative products
Manufacturers of vehicles Indirect Possible decision by some firms for Limited Long term Medium (unclear nature of
and components not place some products in Europe measures and the reaction
due to uncertainty in terms of of firms)
possible introduction of measures at
national level
61

3.5 - Attention area E: procedures for ensuring conformity of production
Problem definition
Ensuring that all vehicles produced follow the specifications and performance of the type approved is
important to ensure the effectiveness of the legal framework and reduce the presence of non-compliant
and/or unsafe products. Under Directive 2007/46/EC, the approval authorities that grant an EC type approval
are required to verify on a periodic basis that adequate procedures are in place to ensure that production
conforms to the approved type. An initial assessment of conformity of production (CoP) systems is to be
performed prior to granting of EC type approval and, subsequently, the type approval authority should verify
continuing conformity at specified intervals. It may verify the conformity control methods applied in each
production facility at any time.
However, the Fitness Check and the RPA study identified the performance of CoP as one of the weak links in
the operation of the whole system with significant variation in the strictness with which the rules are applied
among different Member State authorities and even more so in the case of firms outside the EU. Tyre
manufacturers indicated that there have been cases identified where CoP has not been taking place on a
continuous basis. According to the RPA study, less than 30% of all respondents to the public consultation
indicated that the current procedures for ensuring CoP are effective and estimated that around 10-15% of
non-compliant and unsafe automotive devices in the market are linked to the specific problem. According to
ETRMA, recent tests have shown that up to 10% of tyres in the market are not compliant and the ineffective
CoP is considered to be the key reason.
The policy proposals examined include an amendment of Directive 2007/46/EC to adopt the requirements set
out in the NLF, by introducing requirements for the verification of CoP that cover the assessment of quality
management systems for production, and product-related controls through inspection and testing, under
surveillance by the relevant authorities.
Under the NLF, the quality assurance system of the manufacturer has to be assessed by the notified bodies
(equivalent to Technical Services) based on the detailed quality assurance system documentation to be
approved by that authority or appointed body. The documentation to be submitted is likely to be similar to
that submitted under the “initial assessment” (where this refers to the assessment of quality management
systems) under Directive 2007/46/EC. Overall, a comparison of both regulatory requirements suggests that the
conformity assessment procedures set out in Module D of the NLF are very similar to Annex X of Directive
2007/46/EC (see Annex D).
According to the analysis of RPA the adoption of the NLF will bring the following changes:
● Under Directive 2007/46/EC, the type approval authority that issues the EC type approval is also
responsible for ensuring CoP. In the NLF, the responsibility for ensuring CoP will be placed on notified
bodies (equivalent to Technical Services). However, according to the Commission services such provisions
should not be expected to apply in the case of the Motor Vehicles Type Approval framework.
Responsibility for CoP will remain with Type Approval Authorities even if the physical CoP inspections in
the manufacturers’ premises are done by Technical Services;
● According to the NLF the quality assurance system of the manufacturer has to be assessed by the
Technical Services. Again, in the case of the Motor Vehicles Type Approval framework this will remain the
responsibility of type approval authorities. ;
● The manufacturer is required to keep the declaration of conformity for each product model at the disposal
of the national authorities for 10 years after the product has been placed on the market. The NLF requires
that the manufacturer’s application to the Technical Service (or notified body) for initial assessment is
kept for 10 years, any changes to it are kept for at least 10 years, audit reports by the technical service (or
notified body) (when they audit the manufacturer) shall be kept for at least 10 years, and reports from
unexpected visits are to be kept for at least 10 years.
62

Analysis of impacts
Sectors affected
In principle the proposed requirements will affect all manufacturers of vehicles and components that may
need to make changes to their quality management systems in order to comply with the requirements and to
handle the documentation through the introduction of record management systems.
In practice, manufacturers of vehicles (OEMs as well as sports cars) do not expect the proposed requirement
to create additional costs. OMEs already have in place quality assurance structures to ensure conformity of
production that go beyond the proposed requirements. They tend to cover not only their direct suppliers but
the suppliers’ suppliers, and include inspection of facilities right down the supply chain across the globe. This is
driven by liability concerns rather than legislation. As such, the proposed changes are not expected to lead to
any changes to the practices of large OEMs or the Tier 1 suppliers.
In the case of smaller actors in the automotive sector – producers of vehicles in small volumes, such as trailers
and semi-trailers, special purpose vehicles and body builders – the discussion with the representatives and the
85
input from two firms in the Fitness Check study indicated that many of them have established quality
systems following the ISO9000 standard principles even if they are not formally certified. In the UK a national
CoP clearance is a common approach used by small volume vehicle producers (one-of cost of around €2,000-
3,500) which is cheaper than a formal ISO9000 certification. Any changes that could make a formal ISO
mandatory are expected to incur certain costs for small manufacturers, although for most of them they are not
86
be expected to be more than a few thousand Euros (including initial certification plus periodic renewal fees).
It should be stated that the proposed NLF provisions do not make the adoption of ISO standards mandatory.
Nonetheless, as the trailers industry representative suggested, a significant number of firms (possibly up to
50%) do not properly follow CoP requirements. A better enforcement of the requirements in relation to CoP
will introduce costs for the adoption of an appropriate quality system for those producers.
Having said that, it should also be taken into consideration that in the case of small volume sub-segments of
the vehicle manufacturing, an important part makes use of the individual vehicles approval scheme in which
case the conformity of production requirements of the Directive do not apply. There are no specific data
available on the level of use of the IVA scheme by this category of manufacturers. The Fitness Check study
found that a significant number of small volume manufacturers producing mainly for the domestic market
(trailers and semi-trailers, special purpose vehicles like ambulances) make extensive use of the IVA scheme and
as a result they are exempted from conformity of production requirements.
Concerning the requirement to keep data for 10 years, large manufacturers do not consider that this will cause
any new costs. Representatives of small volume manufacturers (such as semi-trailers) indicated that a minor
increase in administrative costs (in the forms of extra work hours of existing staff) to handle the relevant
documentation may arise. However, while unwelcome, none of them indicated that these costs are sizeable.
The RPA study did not identify any direct impact from the selected policy option on innovation and research
and our own discussions with industry representatives does not suggest any direct linkage between the
proposed measure and innovation in firms in the automotive sector. With a broad definition of innovation,
small firms may be seen to be “forced” to adopt changes in quality management systems with possible long
terms benefits in terms of organisation and operational costs.
85
One trailer manufacturer in the UK and one Road tanker manufacturer in Spain.
86
The Spanish bodybuilder indicated a cost of €2,700 for an upgrade to an ISO system as part of the CoP.
63

Tyre manufacturers’ representatives (ETRMA) consider that strengthening Conformity of Production is the key
tool to address the significant level of non-compliant products that they argue are present in the replacement
tyres segment of the tyres market. It is considered to be key for ensuring a level playing field within the EU
market. However, it is primarily the weak implementation of the existing framework – rather that the
inappropriate legal framework– and the fact that manufacturers with production lines based outside the EU
are not subjected to the same type and frequency of controls by type approval authorities as EU-based
manufacturers that are thought to be the main problem. Nonetheless, to the extent that the proposed
changes improve the assessment of CoP, ETRMA considers that this will to be beneficial for the
competitiveness of EU-based manufacturers in contrast to the sizeable number of non-compliant or low
quality imported tyres. On the basis of the RPA study, if the proposed measures achieve a reduction of 50% of
non-compliant products, this would mean a possible additional turnover for compliant manufacturers of tyres
and spare parts of around €250 million per year (0.1-0.5% of the market size of those products). On the basis
of ETRMA data, the possible reduction of non-compliant tyres may be much higher, up to 5% of the total.
For smaller size firms in niche markets like trailers or special purpose vehicles the additional costs of
introducing a more advanced quality management system could be considered to pose a threat when
compared to non-EU competitors. However, in most cases the specific markets remain national/domestic with
very limited competition from non-EU firms. Furthermore, any new entrant will still have to adopt the same
type of quality management system. At the same time, with the exception of sport and luxury vehicles - EU-
firms in these market segments have a very limited, if any, presence in non-EU markets. Thus, the introduction
of quality management systems and the associated costs, are not expected to have competitiveness impacts in
the short term. In the long term, any improvements in efficiency of production and more effective quality
control may bring competitive advantages when exporting to other regions. Such a positive impact is likely to
be very limited, in the short term, and in the long term quite uncertain.
The table overleaf summarises the analysis of the proposed regulatory policy option in relation to the problem
area E.
64
Section

Affected sectors Direct/Indirect Impact expected/identified Size of impact Duration of Risk/uncertainty of
impact assessment
Manufacturers of vehicles Direct Very limited/zero additional costs for Limited/Zero Short term Low
(OEMs and sports cars), introduction of additional quality
components (Tier 1) and management system (for the majority of
tyres firms in the sector already in place)
Manufacturers of trailers Direct Additional costs for introduction/adoption Medium Short term Medium (uncertain share
and semi-trailers, of QMS from some firms (around 50% or of firms that do not comply
bodybuilders and special more do not follow CoP properly) and uncertain effectiveness
purpose Risk of additional operation costs from of enforcement)
possible delays in CoP checking from
authorities
Manufacturers of vehicles Direct Possible incentive for the Limited (most firms Long term High
and components(mainly adoption/improvement of production in the sector already
small size) quality management system – firm level have them in place)
organisational innovation
Manufacturers of vehicles Direct Reduce/eliminate non-compliant products Limited/Zero Long term Low
and components – increase relative competitive position
Manufacturers of Direct Reduce/eliminate non-compliant Significant for Long term High (uncertainty of
components products– increase relative competitive certain segments effectiveness)
position (Low generally)
Small market gains
Manufacturers of tyres Direct Reduce/eliminate non-compliant products Significant Long term High (uncertainty of
– increase relative competitive position effectiveness and extent of
Possibly significant market gain non-compliant products)
65
Assessment of advanced study 4

4. Assessment of the need for advanced study
As part of the analysis we considered the possible need for and the character of an advanced study to
complement this initial basic analysis. The assessment of the need for an advanced study is based on the
following criteria:
● expected importance (relevant size) of the impacts against the baseline concerning the costs of doing
business, innovative capacity and international competitiveness. When the initial quantification indicates
that the expected impacts should be expected to be insignificant with a high level of certainty a detailed
quantitative assessment may not be justified. In contrast, if there are indications of significant impacts on
one or more of the competitiveness aspects, a more thorough assessment will be justified;
● level of certainty provided by existing data. The greater the level of uncertainty, the greater the need for
the collection of additional information in order to reach reliable estimates, particularly in the case that
impacts are expected to be sizeable; and
● expected contribution of other research tools: We also need to take into consideration the extent that
use of additional research tools should be expected to provide results to address the gaps. The possible
tools include the conduct of extensive survey of business and other stakeholders, a more detailed
interview programme or case studies focusing on specific themes or subsectors. Furthermore, the analysis
of data from proprietary databases and modelling tools could be useful.
On the basis of this we considered four possible options which were already described in certain detail in the
Inception Report. These were:
 Option 1 – No additional analysis: When the basic analysis allows for reasonable quantification of all key
aspects and there is no uncertainty then a more analysis will not be necessary.
 Option 2 – Limited additional data analysis needed: This is an option in the case that there are answers
provided in relation to certain to most of the aspects of the competitiveness proofing but there are certain
sub-sectors or thematic areas that are considered of significance and for which there are data gaps or
significant assumptions are necessary.
 Option 3 – Moderate additional data analysis needed: Such an option will be appropriate if the basic
analysis provides mainly qualitative answers to most of the aspects of the competitiveness proofing
examined and/or there are certain impacts that are expected to be sizeable but there is high level of
uncertainty. The validity of the assumptions made and the direction of certain impacts will have to be
further verified.
 Option 4 – Extensive additional data analysis needed: This option would be necessary if the basic study
achieved only a qualitative assessment of most aspects of the competitiveness proofing examined and
these aspects are expected to be sizeable.
Areas/issues that require further analysis
In our analysis it has not been possible to quantify the expected impacts on operational costs and even more
so on prices in relation to a number of impacts. On various occasions, the industry representatives did not
have information on the practices of their members or the possible additional operational costs arising from
certain options. In at least one case (CLEPA) it was stated that the answers provided should not necessarily be
considered representative of the views of its members. Furthermore, the team did not have the resources to
assess the impact on the structure of the markets, the interrelation of products and the role of substitutes. In
the following paragraphs we summarise the issues and topics where additional research could be necessary to
quantify impacts and address the high levels of uncertainty.
66

Policy area A - Traceability of products and responsibilities of economic operators
 An element of uncertainty in relation to this policy area is whether the adopted provisions will require
identification of individual components. However, our interpretation of the requirements and the
discussions with industry and the Commission services – together with the review of the Motorcycle
Regulation – suggest that this should not be expected to be the case. Thus, a high costs scenario is highly
unlikely.
Policy area B- Responsibilities and cooperation of enforcement authorities
 There are no significant costs arising for industry and no negative impacts on competitiveness are
expected. There are only possible benefits from a reduction of non-compliance. .
Policy area C - Quality and performance of Technical Services
 It has not been possible to assess the possible impact of the introduction of technical and financial
independence criteria for the various types of Technical Service, particularly the smaller ones. A more
extensive survey of Technical Services could help to assess the extent that Technical Services consider that
they fulfil the proposed provisions, the expected costs – and benefits – of introducing formal accreditation
requirements and the reaction of the smaller Technical Services.
 Another element of uncertainty is the extent to which Member States are considering introducing formal
accreditation requirements and the nature of these requirements. At this stage only some countries
require conformity with formal ISO standards. This can have implications for the costs of the proposed
provisions against the baseline.
Policy area D- Post-market safeguard measures and recalls
 The main uncertainty in relation to this policy area is the probability that Member States authorities will
consider taking measures at the national level. This depends on assessing the areas where such action is
possible in view of the fact that most products in the automotive sector are sold across multiple EU
Member States. This would require would require input from national authorities to identify areas where
Member States would consider taking action at the national level. However, this would still be a rather
speculative exercise and, in any event,,, a high level of uncertainty will probably remain.
Policy area E- procedures for ensuring conformity of production
 There is limited information in relation to the proportion of firms – particularly among smaller
manufacturers– that may need to upgrade their quality management systems and on the associated cost
implications. A firm survey could possibly provide data for a more thorough assessment.
Overall issues and considerations
 The assessment has made use of the estimates provided in the RPA study in relation to the share and
market size of non-compliant and unsafe products in the market and the expected effectiveness of the
proposed policy options. Our own experience from the Fitness Check study and the review of other
relevant documents suggests that, in general, there is limited information on the amount of non-
compliant products and that the estimates provided by RPA, while based on a number of key assumptions,
are as good as any other study could possibly provide. In that respect, while there is clearly a high level of
uncertainty associated with the results, we do not consider that an additional effort to assess the share of
non-compliant products could achieve a greater level of certainty.
 The analysis provided of the cost structures of the industry are based on secondary data that cover
primarily the large OEMs and do not provide a clear differentiation between small and large firms.
Targeted case studies could possibly provide the basis for a more detailed analysis of those costs.
However, for a large number of sub-sectors the identified costs are expected to be rather marginal.
 It has not been possible to assess the possible impact (benefit) for firms in the different segments affected
(spare parts, tyres) by a reduction in the number of non-compliant products in terms of the operation of
the market and how this may also affect the prices of products. There is also uncertainty concerning the
effectiveness of the proposed measures and their capacity to reduce non-compliance. A survey of
67

stakeholders (economic operators, authorities) could give a greater indication of the expected role of the
proposed measures. However, this has already been done in the RPA study and may not bring much
added value.
 The main sector where there is a high level of uncertainty and possible significant impacts is the Technical
Services sector. Limited information on the structure of the Technical Services market and limited input
from smaller Technical Services means that there is high level of uncertainty in terms of some possible
impacts.
 Against the need for a greater input from economic operators, there should be serious consideration of
the fact that there have already been several separate exercises examining the Motor Vehicles Type
Approval legal framework (Commission consultation, RPA evaluation, Fitness Check), all of which have
requested input from firms through the use of a survey. In all cases the response rates were rather low.
There is clearly a certain level of survey fatigue among firms which means that any future study runs the
risk of collecting only very limited data that will not effectively address the uncertainties identified.
Proposal for an advanced study
On the basis of the above analysis and considerations, together with the fact that under the dominant scenario
most categories of economic operator will not be significantly affected, we do not consider that a large scale
study aiming to quantify the impacts of the proposed policy options is justified. In most policy areas the
added value of an advanced study and the capacity to support quantification with a high level of certainty
appears rather limited.
It is only in relation to Policy Area C where additional research could provide useful information to assess the
impacts on the Technical Services sector. This would be in the form of a small scale targeted study including
targeted survey of Technical Services complemented by in-depth case studies of a few selected Technical
services of different sizes and structures that could be used to assess the cost implications and the possible
responses to the proposed requirements .
The table below summarises the proposal for the advanced study.
Objectives Collect more information on the structure of the Technical Services market and the
practices of Technical Services organisations
Collect information as to the possible response of different types of Technical Services
to the proposed independence criteria and the impact on their operation
Proposed research Survey of selected stakeholders (primarily Technical Services) ) aiming to achieve a
tools representative sample reflecting differences in size and structures in order to provide
a high level of confidence in relation to expected impacts/responses to proposed
provisions.
In-depth case studies of selected number of Technical services to assess cost
implications and responses.
Duration 23 months
Estimated budget 20,000-30,000
68
Conclusions and recommendations 5
5. Conclusions and Recommendations
5.1 Conclusions
Overall picture
The assessment of the impacts on the automotive sector of the proposed policy options has been based on the
analysis of relevant pieces of legislation, inputs from the relevant stakeholders and secondary data sources
including the RPA impact assessment study. Given the limited resources available and the brief timeframe of
the analysis in a number of areas it has not possible to find the necessary data that would allow us to
corroborate inputs from a single source or logical inferences made on the basis of our analysis. As a result,
there is an unavoidable level of uncertainty in some of the conclusions reached.
Given these limitations, the analysis suggests that, in general, the proposed measures should not be expected
to have sizeable impacts on the competitiveness of most segments of the automotive sector. Most firms will
not incur significant administrative costs or make any changes to their organisational structures. A possible
exception are distributors of vehicles and components that will need to upgrade their record management
processes. Furthermore, an important proportion of existing Technical Services - mainly small ones - should be
expected to face some additional costs to ensure an organisational separation of personnel in order to meet
independence criteria..
The benefits of the proposed measures mainly arise from the reduction in the number of non-compliant
products, ensuring a level playing field and allowing firms that produce compliant products – mainly in the
tyres and spare parts sector - to capture market share. The data available suggest that this may vary from less
than 1% of the market to up to 5-10% for certain product categories.
The study also examined the possible impact of an unlikely scenario, , that would arise if more demanding
interpretations of the requirements apply in relation to policy areas A and C, requiring an individual serial
number for each component and a physical separation of the activities of Technical Services. The cost
implications of the measures could be significant and affect more segments of the automotive. However, our
understanding is that both scenarios are highly unlikely, and, as a result, the associated costs should not be
expected to arise.
The paragraphs below summarise the findings in relation to each of the key competitiveness proofing
questions.
Sectors affected by the proposed policy measures
Our analysis indicates that the proposed measures could possibly affect a wide range of subsectors in the
automotive industry. The measures cover both manufacturers of vehicles, components and tyres, distributors
and importers of vehicles and spare parts and providers of Technical Services. Indirectly, there may also be
impacts on producers of traceability systems. The analysis has not indicated impacts on other sectors outside
the broader automotive supply chain.
Effect on cost and price competitiveness
Measures under Policy area A on traceability are relevant but are already met by large manufacturers as part
of current practice. The same seems to apply, in general terms, to smaller manufacturers (e.g. body builders,
trailers and semi-trailers, special purpose vehicles, sport vehicles) which consider that the proposed
requirements can be met by current practices and with limited additional administrative work.
Distributors and importers of vehicles and components – authorised or independent – expect some
administrative work to arise from the new obligations under Policy area A but, with the exception of
69

authorised dealers of motor vehicles, they do not consider that the impacts for firms are going to be
substantial.
The proposed provisions under Policy Areas B and C should be expected to have a direct impact on the costs
of operation for Technical Services. Requirements for the creation of a Technical Services Co-ordination Group
should be expected to create some additional costs (probably in the range of a few thousand Euros/year)
which may have a sizeable impact on the large number of small Technical Services that have limited resources.
Requirements relating to the technical and financial independence of Technical Services may have a different
impact depending on whether legal or personnel/organisational separation will be sufficient or a more strict
interpretation will apply that will imply physical separation. Our understanding of the proposed provisions is
that organisational separation of personnel involved in type approval and other activities will be sufficient. In
that case, the additional costs for large Technical Services will probably be very limited since most already
meet such requirements. For some small Technical Services with limited human resources, they will introduce
certain costs and present a challenge that could lead some of them to exit the Technical Services market.
However, on the basis of the information available, it has not been possible to assess the size of the costs, the
share of the Technical services market affected and how many may decide to leave the market.
Given the rather limited competition in the relevant market with the EU, any increase in the costs of operation
of Technical Services should be expected to be passed on to their clients (manufacturers of vehicles and
components). However, the fees of Technical Services for type approval are a very small part of the costs for
firms, even for small size firms. As a result, the impacts, if they arise, will most probably be minimal.
The proposed measures under policy Area D (two step approach) are not expected to have a direct impact on
the operational costs of firms in the automotive sector. There are concerns that the two step approach will
give rise to uncertainty but the information provided suggests that the probability of Member States taking
such action is limited.
Finally, the proposed provisions under Policy area E (procedures ensuring conformity of production) are
expected to have a minor impact on costs for manufacturers of vehicles and components, primarily for those
with no established quality management systems. Representatives of the firms in the sector suggest that most
firms do have such systems – in accordance with existing provisions under the Framework Directive - even if
there do not adopt formal ISO quality systems. Firms that are not complying with current requirements should
be expected to incur significant costs if the proposed measures are properly implemented.
Impact on SMEs
The analysis indicates that the proposed policy measures may, in relative terms, have greater impact on some
sectors in the industry where there is a significant SME presence, such as manufacturers of certain categories
of vehicle, distributors of vehicles and components and also Technical Services. The impacts arise mainly in the
form of administrative costs.
However, the expected impacts under Policy Area A are relatively minor. Certain record management costs
will arise for small firms, some of which do not already have systems in place, but, on the basis of the input
provided, the overall costs do not appear to be disproportionate..
In relation to Policy Area C, the proposed requirements for independence are expected to have a greater
impact on small Technical Services, since they may not be able to adopt clear organisational structures and
organisational separation of personnel, without incurring sizeable costs or, possibly exiting the market.
Impact on innovative activity
Overall, the analysis does not indicate any direct effects from the proposed policy measures on the innovative
activity of firms in the automotive sector.
Under Policy area A (Traceability of products and responsibilities of economic operators), requirements on
traceability based on a demanding interpretation that would require identification of each individual
component could probably create demand for new traceability systems and for more integrated supply chain
management systems. However, the current policy proposals do not require the adoption of such systems.
70

Adopting a rather broad definition of innovation, small size manufacturers (e.g. trailers or special purpose
vehicles) may be encouraged – but not forced - to adopt changes in quality management systems to ensure
compliance with CoP requirements under Policy Area E (Procedures for ensuring conformity of production)
with possible long terms benefits in terms of organisation and operational costs.
The independence criteria for Technical Services under Policy Area C (Quality and performance of Technical
Services) will also lead to organisational changes which, in some cases, create an obstacle to the transfer of
knowledge among those working on type approval related testing and those providing product design and
other consultancy services. Again, this is not considered to be a significant concern either for firms or for the
large size Technical Services that contributed to the study.
Of course, at a more general level, improvements in market surveillance, reducing competition from non-
compliant products and ensuring a level playing field provide a supportive environment for innovation.
Effect on international competitiveness
The main impact in terms of competitiveness is the possible contribution to the reduction – if not elimination -
of non-compliant products from the market and the creation of a level playing field. This is particularly
relevant for tyre manufacturers and manufacturers of spare parts and components, the main sectors where
issues of non-compliance are reported. According to the results of the RPA study, a moderate effectiveness of
the measures could lead to a reduction of non-compliant products to a value of around €650 million (no more
than 1% of the market) which could potentially be captured by compliant firms, inside and outside the EU.
Data from industry associations indicate that the benefits may be more significant, particularly in certain
subsectors such as tyres or specific categories of spare parts (e.g. brakes) where the reported levels of non-
compliance are up to 10% of the market. To the extent that the claims of manufacturers that most non-
compliant spare parts and tyres come from outside Europe are valid, there may also be a reduction in the level
of imports from outside the EU, at least in the short term.
In relation to the traceability requirements under Policy area A (Traceability of products and responsibilities
of economic operators),, it is not expected that EU firms will be placed in a disadvantaged position for
accessing third markets. Even under the unlikely scenario requiring individual serial numbers will not have an
impact on large OEMs although it could possibly impact smaller manufacturers that do not have such systems.
Since the markets served by smaller firms (e.g. trailers and semi-trailers, special purpose vehicles) are mainly
national, in the short term such competitiveness issues will not apply.
Our analysis also suggests that there should also be limited expectations of a strengthening of the position of
EU firms in third countries on the basis of improved quality or enhancement of the reputation of the industry.
The EU automotive sector already has a strong reputation in that respect and quality and safety are key selling
points. The proposed measures, while positive, are not expected to make a significant additional contribution.
5.2 Recommendations - mitigation measures

As part of the analysis of the expected impacts of the proposed policy measures we have identified certain
areas where specific actions and mitigating measures should be considered.
Policy area A - Traceability of products and responsibilities of economic operators
 It would be appropriate to clarify the type of components covered by the traceability requirements and
how these requirements can be met. Our understanding is that Commission does not intend to propose
the introduction of individual serial numbers and the analysis suggests that a requirement of this kind is
not justified.
Policy area B- Responsibilities and co-operation of enforcement authorities
 The analysis suggests that there are not specific issues for industry arising from the proposed
requirements.
71

Policy area C - Quality and performance of Technical Services
 The interpretation of the criterion of personnel separation on the basis of existing ISO 17025 standards
appears to be sufficient and more demanding approaches for separate legal entities or different facilities
are disproportionate.
 There is some support for the creation of a Technical Services Co-ordination Group that could assist in
ensuring consistency. However, the costs of operation such a group should be kept to a minimum. If any
type of participation fees are introduced, these should differ depending on the extent of activity and the
scope of the Technical Services so that they are not disproportionately affected.
 Given the possibility of impact on Technical Services – particularly small ones – it is advisable that the
situation in terms of the number and availability of Technical Services is monitored
Policy area D- Post-market safeguard measures and recalls
 If the proposed provisions for a two step approach are adopted, the Commission should examine the
possibility of clarifying the circumstances (relevant legislation, issues) under which a two step approach
will be applied, the relevant procedures and indicate under which conditions Member States should be
expected to notify the Commission and other Member States before national measures are taken.
Policy area E- procedures for ensuring conformity of production
 The analysis suggests that there are not any specific issues arising from the proposed requirements. The
discussions with industry only point to the need to ensure that CoP is properly checked for both EU and
non-EU manufacturers that place products in the EU market.
72
of identified options for a Commission's policy proposal on the Review of Directive Appendix
Product codes A
PRODCOM Codes
PRODCOM Code Label
22111100 New pneumatic rubber tyres for motor cars (including for racing cars)
22111200 New pneumatic tyres, of rubber, of a kind used on motorcycles or bicycles
22111355 New pneumatic rubber tyres for buses or lorries with a load index <= 121
22111357 New pneumatic rubber tyres for buses or lorries with a load index > 121
22111370 New pneumatic rubber tyres for aircraft
22111400 Agrarian tyres; other new pneumatic tyres, of rubber
22111530 Solid or cushion rubber tyres; interchangeable rubber tyre treads
22111550 Rubber tyre flaps
22111570 Inner tubes, of rubber
22111600 Camel-back strips for retreading rubber tyres
22112030 Retreaded tyres of rubber of a kind used on motor cars
22112050 Retreaded tyres of rubber of a kind used on buses and lorries
22112090 Retreaded tyres of rubber (including of a kind used on aircraft; excluding of a kind used on
motor cars; buses or lorries)
26516453 Vehicle speed indicators
26516455 Tachometers
29101100 Spark-ignition reciprocating internal combustion piston engines, for the vehicles of HS 87
(excluding motorcycles), of a cylinder capacity <= 1 000 cm³
29101200 Spark-ignition reciprocating internal combustion piston engines, for the vehicles of HS 87
(excluding motorcycles), of a cylinder capacity > 1 000 cm³
29101300 Vehicle compression-ignition internal combustion piston engines (diesel or semi-diesel)
(excluding for railway or tramway rolling stock)
29102100 Vehicles with spark-ignition engine of a cylinder capacity <= 1 500 cm³, new
29102230 Motor vehicles with a petrol engine > 1500 cm³ (including motor caravans of a capacity >
3000 cm³) (excluding vehicles for transporting >= 10 persons, snowmobiles, golf cars and
similar vehicles)
29102250 Motor caravans with a spark-ignition internal combustion reciprocating piston engine of a
cylinder capacity > 1500 cm³ but <= 3000 cm³
29102310 Motor vehicles with a diesel or semi-diesel engine <= 1500 cm³ (excluding vehicles for
transporting >= 10 persons, snowmobiles, golf cars and similar vehicles)
29102330 Motor vehicles with a diesel or semi-diesel engine > 1500 cm³ but <= 2500 cm³ (excluding
vehicles for transporting >= 10 persons, motor caravans, snowmobiles, golf cars and similar
vehicles)
29102340 Motor vehicles with a diesel or semi-diesel engine > 2500 cm³ (excluding vehicles for
transporting >= 10 persons, motor caravans, snowmobiles, golf cars and similar vehicles)
29102353 Motor caravans with a compression-ignition internal combustion piston engine (diesel or
semi-diesel) of a cylinder capacity > 1500 cm³ but <= 2500 cm³
29102355 Motor caravans with a compression-ignition internal combustion piston engine (diesel or
semi-diesel) of a cylinder capacity > 2500 cm³
29102400 Other motor vehicles for the transport of persons (excluding vehicles for transporting >= 10
persons, snowmobiles, golf cars and similar vehicles)
29103000 Motor vehicles for the transport of >= 10 persons
29104110 Goods vehicles with a diesel or semi-diesel engine, of a gross vehicle weight <= 5 tonnes
(excluding dumpers for off-highway use)
29104130 Goods vehicles with a diesel or semi-diesel engine, of a gross vehicle weight > 5 tonnes but
<= 20 tonnes (including vans) (excluding dumpers for off-highway use, tractors)
29104140 Goods vehicles with compression-ignition internal combustion piston engine (diesel or
semi-diesel), of a gross vehicle weight > 20 tonnes (excluding dumpers designed for off-
73
Product codes A
highway use)
29104200 Goods vehicles, with spark-ignition internal combustion piston engine; other goods
vehicles, new
29104300 Road tractors for semi-trailers
29104400 Chassis fitted with engines, for tractors, motor cars and other motor vehicles principally
designed for carrying people, goods vehicles and special purpose vehicles including for
racing cars
29105100 Crane lorries
29105200 Motor vehicles specially designed for travelling on snow, golf cars and similar vehicles
29105930 Fire fighting vehicles
29105950 Concrete-mixer lorries
29105990 Other special-purpose motor vehicles n.e.c.
29201030 Bodies for motor cars and other motor vehicles principally designed for the transport of
persons (including for golf cars and similar vehicles) (excluding those for transporting >= 10
persons)
29201050 Bodies for lorries, vans, buses, coaches, tractors, dumpers and special purpose motor
vehicles including completely equipped and incomplete bodies, vehicles for the transport
of >=10 persons
29202100 Containers specially designed and equipped for carriage by one or more modes of
transport (including containers for transporting fluids)
29202292 Trailers and semi-trailers of the caravan type, for housing or camping, of a weight <= 1 600
kg
29202298 Trailers and semi-trailers of the caravan type, for housing or camping, of a weight > 1 600
kg
29202300 Other trailers and semi-trailers for the transport of goods
29203030 Chassis for trailers, semi-trailers and other vehicles which are not mechanically propelled
29203050 Bodies of trailers, semi-trailers and other vehicles which are not mechanically propelled
29203070 Axles of trailers, semi-trailers and other vehicles which are not mechanically propelled
29203090 Parts for trailers, semi-trailers and other vehicles which are not mechanically propelled
(excluding chassis, bodies, axles)
29311000 Insulated ignition wiring sets and other wiring sets of a kind used in vehicles, aircraft or
ships
29312130 Sparking plugs
29312150 Ignition magnetos, magneto-dynamos and magnetic flywheels
29312170 Distributors and ignition coils
29312230 Starter motors and dual purpose starter-generators
29312250 Generators for internal combustion engines (including dynamos and alternators) (excluding
dual purpose starter-generators)
29312270 Equipment, n.e.c., for internal combustion engines
29312310 Electrical or battery operated lighting or visual signalling of a kind used on bicycles
29312330 Electric burglar or fire alarms and similar apparatus for motor vehicles
29312350 Electrical sound signalling equipment for motorcycles or motor vehicles
29312370 Windscreen wipers, defrosters and demisters for motorcycles or motor vehicles
29313030 Parts of electrical ignition or starting equipment, generators and cut-outs for internal
combustion engines
29313080 Parts of equipment of 85.12
29321000 Seats for motor vehicles
29322030 Safety seat belts
29322050 Airbags with inflator system and parts thereof
29322090 Parts and accessories of bodies (including cabs), n.e.c.
29323010 Bumpers and parts thereof (including plastic bumpers)
74
Product codes A
29323020 Brakes and servo-brakes and their parts (excluding unmounted linings or pads)
29323033 Gear boxes and their parts
29323036 Drive-axles with differential, non-driving axles and their parts
29323040 Road wheels and parts and accessories thereof
29323050 Suspension systems and parts thereof (including shock absorbers)
29323061 Radiators for tractors, motor cars, goods vehicles, crane lorries, fire fighting vehicles,
concrete-mixer-, road sweeper-, spraying lorries, mobile workshops and radiological units;
parts thereof
29323063 Silencers and exhaust pipes; parts thereof
29323065 Clutches and parts thereof
29323067 Steering wheels, steering columns and steering boxes; parts thereof
29323090 Other parts and accessories, n.e.c., for vehicles of HS 87.01 to 87.05; parts thereof
299900Z1 Flashlights; Image projectors; Cinematographic projectors; photographic enlargers and
reducers; apparatus for photographic laboratories; negatoscopes, projection screens
UN ComTrade product codes
8702- Motor vehicles for the transport of ten or more persons

8703-Motor cars and other motor vehicles principally designed for the transport of persons
8704-Motor vehicles for the transport of goods
8705-Special purpose motor vehicles
8707-Bodies (including cabs), for motor vehicles
8708-Parts and accessories for motor vehicles

851240 -Windscreen wipers, defrosters and demisters
8512 - Electric lighting, signal equipment, car electrics
8511 - Ignition/starter equipment, internal combustion engine
870810- Bumpers and parts thereof for motor vehicles

870829-Parts and accessories of bodies for motor vehicles
870840-Transmissions for motor vehicles
870850-Drive axles with differential for motor vehicles
870891-Radiators for motor vehicles
870894-Steering wheels, columns & boxes for motor vehicles
870899-Motor vehicle parts nes
870892-Mufflers and exhaust pipes for motor vehicles
870880-Shock absorbers for motor vehicles
870821-Safety seat belts for motor vehicles
870870-Wheels including parts/accessories for motor vehicles
870893-Clutches and parts thereof for motor vehicles
870831- Mounted brake linings for motor vehicles
870839-Brake system parts except linings for motor vehicles
870860-Non-driving axles/parts for motor vehicles
700910 - Rear-view mirrors for vehicles
4011-New pneumatic tyres, of rubber.

4012-Retreaded or used pneumatic tyres of rubber
75
References B
Appendix B - References
Policy documents
1. Directive 2007/46/EC relating to the type approval of motor vehicles and related legislation
2. Decision 768/2008/EC on a common framework for the marketing of products (NLF)
3. CARS 2020 : Action Plan for a competitive and sustainable automotive industry in Europe
st
4. CARS 21 Final Report ‘A competitive automotive regulatory system for the 21 century’
5. EC (2012), Operational guidance for assessing impacts on sectoral competitiveness within the commission
impact assessment system - a "competitiveness proofing" toolkit for use in impact assessments
6. A New Strategy for the Single Market at the service of Europe’s economy and society, Mario Monti, May
2010 Decision 768/2008/EC
7. EC (2010), DISCUSSION NOTE FOR THE TCMV MEETING OF 26 MARCH 2010, Item 4. Presentation and
continued exchange of views on the possible impact of the New Legislative Framework – in particular its
market surveillance provisions and practice – on the acquis in the automotive sector,
Impact assessment and evaluation reports

8. Results of the Consultation on enhancing the implementation of the internal market for motor vehicles
(2010-2011)
9. Impact Assessment Roadmap: Enhancing the implementation of the internal market for motor vehicles,
European Commission (July 2011)
10. Impact Assessment Study on Enhancing the Implementation of the Internal Market Legislation Relating to
Motor Vehicles, RPA (2012)
11. Fitness Check of the Legal Framework for the Type-Approval of Motor Vehicles, CSES (2013)
12. EC(2011), NEW LEGISLATIVE FRAMEWORK (NLF) ALIGNMENT PACKAGE - (Implementation of Goods
Package) - COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT, COM(2011) 763 final,
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2011:1376:FIN:EN:PDF
13. EC (2010), Consultation on enhancing the implementation of the internal market for motor vehicles,
market/index_en.htm
Industry studies
14. Roland Berger strategy consultants (2011), Global automotive suppliers study
15. Roland Berger strategy consultants (2011), Automotive landscape 2025 - Opportunities and challenges
ahead
16. Boston Consulting Group (2011), The European automotive aftermarket landscape – Customer
perspective, market dynamics and the outlook for 2020
17. Matthias Holweg, Philip Davies & Dmitry Podpolny (2009), The competitive status of the UK automotive
industry
18. Autobeat insider (2011), Automotive Industry Mega Trends,
http://autobeatinsider.com/perspectives/automotive-industry-mega-trends
19. KPMG (2012), KPMG’s Global Automotive Executive Survey 2012,
http://www.kpmg.com/GE/en/IssuesAndInsights/ArticlesPublications/Documents/Global-automotive-
executive-survey-2012.pdf
20. Evalue Serve (2012), White Paper - Platform Strategy will Shape Future of OEMs - Flexibility to Drive
Growth, http://sandhill.com/wp-
content/files_mf/evalueservewhitepaperplatformstrategywillshapefutureofoems.pdf
21. EPA (2009), Automobile Industry Retail Price - Equivalent and Indirect Cost Multipliers, Prepared for EPA
by RTI International and Transportation Research Institute University of Michigan
76
References B
22. Bertelsmann Stiftung (2011), Managing the International Value Chain in the Automotive Industry-
Strategy, Structure, and Culture
23. Radosevic. S., and Rozeik, A., (2005), Foreign direct investment and restructuring in the Automotive
industry in Central and Eastern Europe
24. Alix Partners (2010), High Stakes - 2010 Global Commercial Vehicle Outlook - OCTOBER 2010
25. IMAP (2010), Automotive and Components Global Report — 2010
26. Deloitte (2010), A new era : Accelerating toward 2020 — An automotive industry transformed
27. Domanski, B., Lung, Y., (2009), The changing face of the European periphery in the automotive industry,
European Urban and Regional Studies 2009 16:5
28. Haugh, David, Mourougane, Annabelle, Chatal Olivier (2010), ‘The Automobile Industry in and Beyond the
Crisis’. OECD Working Paper 745,
http://search.oecd.org/officialdocuments/displaydocumentpdf/?doclanguage=en&cote=eco/wkp(2010)1
29. ‘EU Industrial Structure 2011, Trends and Performance’, European Commission DG Enterprise & Industry
(2011)
30. Tang, R. (2009). The rise of China’s auto industry and its impact on the U.S. motor vehicle industry.
Washington, DC: Congressional Research Service,
http://digitalcommons.ilr.cornell.edu/key_workplace/688
31. International Conference on Asia Pacific Business Innovation & Technology
32. Benjamin Thoma and David O‟Sullivan (2011), Management - Study on Chinese and European automotive
R&D – comparison of low cost innovation versus system innovation, Procedia - Social and Behavioral
Sciences 25 (2011) 214 – 226
33. Jae Hoon Hyun (2008), A Comparative Analysis of Transplants and Industrial Location of Japanese and
Korean Automotive Industries in Europe, INTERNATIONAL JOURNAL OF BUSINESS, 13(3), 2008 ISSN:
1083−4346
34. ACEA (2013), Automobile assembly & engine production plants in Europe,
http://www.acea.be/news/news_detail/automobile_assembly_engine_production_plants_in_europe/
35. ACEA (n.d.), GLOBAL INSIGHT: THE CRISIS IS DEVASTATING,
http://www.acea.be/index.php/news/news_detail/global_insight_the_crisis_is_devastating/
Specific to policy areas examined

37. Odette (2012), RFID for Tracking Parts and Assemblies
38. GS1 (2009), Building Radio frequency Identification for the Global Environment (BRIDGE Project)- Costs
Benefits Analysis : Implementation of solutions based on GS1 and EPCglobal standards for Asset
Management
39. GS1 and Logica CMC (2007), Building Radio frequency Identification for the Global Environment (BRIDGE
Project)- European passive RFID - Market Sizing 2007-2022
40. Patrick Schmitt, Frédéric Thiesse, Elgar Fleisch (2007), Adoption and Diffusion of RFID Technology in the
Automotive Industry, Auto-ID Labs White Paper WP-BIZAPP-041
41. Patrick Schmitt, Frédéric Thiesse, Elgar Fleisch (2007), An Adoption Strategy for an Open RFID Standard -
Potentials for RFID in the Automotive Aftermarket, Auto-ID Labs White Paper WP-BIZAPP-024
42. Patrick Schmitt, Frédéric Thiesse, Elgar Fleisch (2007), Why RFID Adoption and Diffusion takes Time: The
Role of Standards in the Automotive Industry
43. Martin, B.,(2012), Unleash the valude of traceability data , Teradata magazine,
http://www.teradatamagazine.com/v12n03/Viewpoints/Unleash-the-Value-of-Traceability-Data/
44. Intermec (2007), PARTS TRACEABILITY & PRODUCT GENEALOGY – White paper,
http://www.danbygroup.com/uploads/docs/White_Paper_PartsTraceability_Product_Geneology.pdf
45. Informal Expert Group on Product Traceability (2011), Discussion Paper on Voluntary Product Traceability
Schemes,
http://ec.europa.eu/consumers/safety/projects/docs/inventory_discussion_paper_13092011_en.pdf
46. UNIDO (2009), Complying with ISO 17025 - A practical guidebook for meeting the requirements of
laboratory accreditation schemes based on ISO 17025:2005 or equivalent national standards
77
References B
http://www.unido.org/fileadmin/user_media/Publications/Pub_free/Complying_with_ISO_17025_A_prac
tical_guidebook.pdf
47. Law, Stanely (n.d.), ISO 17025 - Testing and Calibration of Laboratories - Business and Quality
Management, http://www.standards.org/standards/listing/iso_17025#TOC_Costs
78
Comparison of NLF and Motorcycles Regulation C

Appendix C - Comparison of NLF and Motorcycles Regulation 168/2013 provisions
NLF provisions Motorcycles regulation
Art. Text Art. Text
Policy Area A
Decision All economic operators will be required: 17 Economic operators shall, on request, identify the
768/2008 - upon request to identify the following to following to the approval authorities and market
Article the market surveillance authorities, for a surveillance authorities, for a period of 10 years for a
R7, [period to be specified in proportion to the vehicle and for a period of five years for a system,
Chapter lifecycle of the product and the level of risk]: component, separate technical unit, part or
R2 (a) any economic operator who has supplied equipment:
them with a product; (a) any economic operator who has supplied them
(b) any economic operator to whom they with a vehicle, system, component, separate
have supplied a product technical unit, part or equipment;
(b) any economic operator to whom they have
supplied a vehicle, system, component, separate
technical unit, part or equipment.
Decision Manufacturers to ensure that their products No provisions
768/2008 - or the packaging/documentation depending
Article on the size/nature of the product - bear a
R2, type, batch or serial number or other
Chapter element allowing their identification.
R2
Decision - indicate their name, registered trade name 9 - manufacturers shall indicate their name, registered
768/2008 or registered trade mark and the address at trade name or registered trade mark and the address
Article which they can be contacted on the product in the Union at which they can be contacted on their
R2, or, where that is not possible, on its vehicles, components or separate technical units
Chapter packaging or in a document accompanying made available on the market or, where that is not
R2 the product. The address must indicate a possible, on the packaging or in a document
single point at which the manufacturer can accompanying the component or separate technical
be contacted. unit.
Decision Distributors 14 Before making available on the market, registration
768/2008 verify that the product bears the required or entry into service of a vehicle, system, component
Article conformity marking or markings, is or separate technical unit, distributors shall verify
R5, accompanied by the required documents and that the vehicle, system, component or separate
Chapter by instructions and safety information in a technical unit bears the required statutory marking or
R2 language which can be easily understood by type-approval mark, that it is accompanied by the
consumers and other end-users in the required documents and by instructions and safety
Member State in which the product is to be information in the official language or languages of
made available on the market, and that the the Member State in which the vehicle, system,
manufacturer and the importer have component or separate technical unit is to be made
complied with their responsibilities available on the market, and that the importer and
the manufacturer have complied with the
requirements set out in Article 12(2) and (4) and
Article 39(1) and (2).
Decision When they have reason to believe that a 15 Where distributors consider or have reason to believe
768/2008 product is not in conformity with any that a vehicle, system, component or separate
Article requirements, not to make the product technical unit is not in conformity with the
R5, available on the market until it has been requirements of this Regulation, they shall not make
Chapter brought into conformity. available on the market, register or enter into service
R2 the vehicle, system, component or separate technical
unit until it has been brought into conformity.
Decision where the product presents a risk, the 15 Where the vehicle, system, component, separate
768/2008 distributor shall inform the manufacturer or technical unit, part or equipment presents a serious
Article the importer to that effect as well as the risk, distributors shall immediately inform the
R5, market surveillance authorities. manufacturer, the importer and the approval and
Chapter market surveillance authorities of the Member States
79

Art. Text Art. Text
R2 in which they made it available on the market. The
distributor shall also inform them of any action taken
and give details, in particular of the serious risk and of
corrective measures taken by the manufacturer.
Decision Importers 12 Before placing on the market a type-approved
768/2008 to ensure that the appropriate conformity vehicle, system, component or separate technical
Article assessment procedure has been carried out unit, importers shall ensure that there is an
R4, by the manufacturer. They shall ensure that information package complying with Article 29(10),
Chapter the manufacturer has drawn up the technical and that the system, component or separate
R2 documentation, that the product bears the technical unit bears the required type-approval mark
required conformity marking or markings and complies with Article 9(8). In the case of a
and is accompanied by the required vehicle, the importer shall verify that the vehicle is
documents, and that the manufacturer has accompanied by the required certificate of
complied with the requirements concerning conformity.
traceability.
Decision When they have reason to believe that a 12 Where importers consider or have reason to believe
768/2008 product is not in conformity with the that a vehicle, system, component or separate
Article requirements, not to place the product on technical unit, part or equipment is not in conformity
R4, the market until it has been brought into with the requirements of this Regulation, and in
Chapter conformity. Furthermore, where the product particular that it does not correspond to its type-
R2 presents a risk, the importer shall inform the approval, they shall not place on the market, allow to
manufacturer and the market surveillance enter into service or register the vehicle, system,
authorities to that effect. component or separate technical unit until it has
been brought into conformity. Furthermore, where
they consider or have reason to believe that the
vehicle, system, component, separate technical unit,
part or equipment presents a serious risk, they shall
inform the manufacturer and the market surveillance
authorities. For type-approved vehicles, systems,
components and separate technical units they shall
also inform the approval authority that has granted
the approval to that effect.
Decision indicate their name, registered trade name 12 - Importers shall indicate their name, registered trade
768/2008 or registered trade mark and the address at name or registered trade mark and the address at
Article which they can be contacted on the product which they can be contacted on the vehicle, system,
R4, or, where that is not possible, on its component, separate technical unit, part or
Chapter packaging or in a document accompanying equipment, or, where this is not possible on its
R2 the product. packaging or in a document accompanying the
system, component, separate technical unit, part or
equipment.
Decision to protect the health and safety of 12 When deemed appropriate with regard to the serious
768/2008 consumers, carry out sample testing of risks presented by a vehicle, system, component,
Article marketed products, investigate, and, if separate technical unit, part or equipment, importers
R4, necessary, keep a register of complaints, of shall, to protect the health and safety of consumers,
Chapter non-conforming products and product investigate and, if necessary, keep a register of
R2 recalls, and shall keep distributors informed complaints and recalls of vehicles, systems,
of such monitoring. components, separate technical units, parts or
equipment and keep distributors informed of such
monitoring.
Decision When they consider or have reason to 13 - Importers who consider or have reason to believe
768/2008 believe that a product which they have that a vehicle, system, component or separate
Article placed on the market is not in conformity technical unit which they have placed on the market
R4, with the Community harmonisation is not in conformity with this Regulation shall
Chapter legislation applicable shall immediately take immediately take the corrective measures necessary
R2 the corrective measures necessary to bring to bring that vehicle, system, component or separate
that product into conformity, to withdraw it technical unit into conformity, to withdraw it or to
80

Art. Text Art. Text
or recall it, if appropriate. Furthermore, recall it, as appropriate.
where the product presents a risk, importers Where a vehicle, system, component, separate
shall immediately inform the competent technical unit, part or equipment presents a serious
national authorities of the Member States in risk, importers shall immediately inform the
which they made the product available to manufacturer and the approval and market
that effect, giving details, in particular, of the surveillance authorities of the Member States in
non-compliance and of any corrective which they have placed it on the market. The
measures taken. importer shall also inform them of any action taken
and give details, in particular, of the serious risk and
any corrective measures taken by the manufacture
Decision for a [period to be specified in proportion to 13 Importers shall, for a period of 10 years after the
768/2008 the lifecycle of the product and the level of placing on the market of the vehicle and for a period
Article risk], keep a copy of the EC declaration of of five years as from the placing on the market for a
R4, conformity at the disposal of the market system, component or separate technical unit, keep a
Chapter surveillance authorities and ensure that the copy of the certificate of conformity at the disposal of
R2 technical documentation can be made the approval and market surveillance authorities and
available to those authorities, upon request ensure that the information package as referred to in
Article 29(10) can be made available to those
authorities, upon request.
Policy area B
Article 17, Member States shall ensure that the public is Reference to Regulation (EC) 765/2008
Regulatio aware of the existence, responsibilities and
n (EC) identity of national market surveillance
765/2008 authorities, and of how those authorities
may be contacted.
Article 18, Member States shall establish appropriate Reference to Regulation (EC) 765/2008
Regulatio communication and coordination
n (EC) mechanisms between their market
765/2008 surveillance authorities.
Member States shall establish, implement 6 Member States shall organise and carry out market
and periodically update their market surveillance and controls of vehicles, systems,
surveillance programmes. Member States components or separate technical units entering the
shall draw up either a general market market in accordance with Chapter III of Regulation
surveillance programme or sector specific (EC) No 765/2008.
programmes, covering the sectors in which
they conduct market surveillance,
communicate those programmes to the
other Member States and the Commission
and make them available to the public, by
way of electronic communication and, where
appropriate, by other means. The first such
communication shall be effected by 1
January 2010. Subsequent updates of the
programmes shall be made public in the
same manner. Member States may
cooperate with all relevant stakeholders
to those ends.
Member States shall periodically review and
assess the functioning of their surveillance
activities. Such reviews and assessments
shall be carried out at least every fourth year
and the results thereof shall be
communicated to the other Member States
and the Commission and be made available
to the public, by way of electronic
81

Art. Text Art. Text
communication and, where appropriate, by
other means.
Article 23, The Commission shall develop and maintain Reference to Regulation (EC) 765/2008
Regulatio a general archiving and exchange of
n (EC) information system, using electronic means,
765/2008 on issues relating to market surveillance
activities, programmes and related
information on non-compliance with
Community harmonisation legislation. The
system shall appropriately reflect
notifications and information provided under
Article 22.
2. For the purposes of paragraph 1, Member
States shall provide the Commission with
information at their disposal and not already
provided under Article 22 on products
presenting a risk regarding, in particular,
identification of risks, results of testing
carried out, provisional restrictive measures
taken, contacts with the economic operators
concerned and justification for action or
inaction.
Article 24, Member States shall ensure efficient The provision of Regulation (EC) 765/2008 have been
Regulatio cooperation and exchange of information adopted to include reference to the type approval
n (EC) between their market surveillance authorities.
765/2008 authorities and those of the other Member
States and between their own authorities Article 46: Where the market surveillance authorities
and the Commission and the relevant of one Member State have taken action pursuant to
Community agencies regarding their market Article 20 of Regulation (EC) No 765/2008, or where
surveillance programmes and all issues they have sufficient reason to believe that a vehicle,
relating to products presenting risks. system, component or separate technical unit
2. For the purposes of paragraph 1, the covered by this Regulation presents a serious risk to
market surveillance authorities of one the health or safety of persons or to other aspects of
Member State shall give the market the protection of public interests covered by this
surveillance authorities of other Member Regulation, the approval authority that granted the
States assistance on an adequate scale by approval shall carry out an evaluation in relation to
supplying information or documentation, by the vehicle, system, component or separate technical
carrying out appropriate investigations or unit concerned covering all the requirements laid
any other appropriate measure and by down in this Regulation. The relevant economic
participating in investigations initiated in operators shall cooperate fully with the approval
other Member States. and/or market surveillance authorities.
3. The Commission shall collect and organise Where, in the course of that evaluation, the approval
such data on national market surveillance authority that granted the approval finds that the
measures as will enable it to fulfil its vehicle, system, component or separate technical unit
obligations. does not comply with the requirements laid down in
this Regulation, it shall without delay require the
relevant economic operator to take all appropriate
corrective action to bring the vehicle, system,
component or separate technical unit into
compliance with those requirements, to withdraw the
vehicle, system, component or separate technical unit
from the market, or to recall it within a reasonable
period, commensurate with the nature of the risk.
Article 21 of Regulation (EC) No 765/2008 shall apply
to the measures referred to in the second
subparagraph of this paragraph.
82

Art. Text Art. Text
Where the approval authorities consider that non-
conformity is not restricted to their national territory,
they shall inform the Commission and the other
Member States of the results of the evaluation and
the action required of the economic operator.
Article 48: The Commission shall, without delay,

consult the Member States and the relevant
economic operator or operators and, in particular,
the approval authority that granted the type-
approval, and shall evaluate the national measure
taken. On the basis of that evaluation, the
Commission shall decide whether the national
measure referred to in paragraph 1 is considered
justified or not, and where necessary, propose
appropriate measures.
Article 25, Market surveillance initiatives designed to Reference to Regulation (EC) 765/2008
Regulatio share resources and expertise between
n (EC) the competent authorities of the Member
765/2008 States may be set up by the Commission or
the Member States concerned. Such
initiatives shall be coordinated by the
Commission.
2. For the purposes of paragraph 1, the
Commission shall, in cooperation with the
Member States:
(a) develop and organise training
programmes and exchanges of national
officials;
(b) develop, organise and set up programmes
for the exchange of experience, information
and best practice, programmes and actions
for common projects, information
campaigns, joint visit programmes and the
consequent sharing of resources.
3. Member States shall ensure that their
competent authorities participate fully in
the activities referred to in paragraph 2,
where appropriate.
Article 27, 1. The authorities of the Member States in Reference to Regulation (EC) 765/2008
Regulatio charge of the control of products entering
n (EC) the Community market shall have the
765/2008 powers and resources necessary for the
proper performance of their tasks. They shall
carry out appropriate checks on the
characteristics of products on an adequate
scale, in accordance with the principles set
out in Article 19(1), before those products
are released for free circulation.
Policy Area C
Article A conformity assessment body shall be a 61 A technical service shall be a third-party body
R17, third-party body independent of the independent of the process of design, manufacturing,
Decision organisation or the product it assesses. supply or maintenance of the vehicle, system,
(EC) A body belonging to a business association or component or separate technical unit it assesses.
83

Art. Text Art. Text
768/2008 professional federation representing A body belonging to a business association or
undertakings involved in the design, professional federation representing undertakings
manufacturing, provision, assembly, use or involved in the design, manufacturing, provision,
maintenance of products which it assesses, assembly, use or maintenance of vehicles, systems,
may, on condition that its independence and components or separate technical units which it
the absence of any conflict of interest are assesses, tests or inspects may, on condition that its
demonstrated, be considered such a body independence and the absence of any conflict of
interest are demonstrated, be considered as fulfilling
the requirements of the first subparagraph.
Article A conformity assessment body, its top level 61 A technical service, its top-level management and the
R17, management and the personnel responsible personnel responsible for carrying out the categories
Decision for carrying out the conformity assessment of activities for which they are designated in
(EC) tasks shall not be the designer, accordance with Article 63(1) shall not be the
768/2008 manufacturer, supplier, installer, purchaser, designer, manufacturer, supplier, or maintainer of the
owner, user or maintainer of the products vehicles, systems, components or separate technical
which they assess, nor the authorised units which they assess, nor represent parties
representative of any of those parties. engaged in those activities.
This shall not preclude the use of assessed This shall not preclude the use of assessed vehicles,
products that are necessary for the systems, components or separate technical units
operations of the conformity assessment referred to in paragraph 3 of this Article that are
body or the use of such products for necessary for the operation of the technical service or
personal purposes. the use of such vehicles, systems, components or
separate technical units for personal purposes.
Article A conformity assessment body, its top level

R17, management and the personnel responsible
Decision for carrying out the conformity assessment
(EC) tasks shall not be directly involved in the
768/2008 design, manufacture or construction, the
marketing, installation, use or maintenance
of those products, or represent the parties
engaged in those activities.
Article They shall not engage in any activity that 61 They shall not engage in any activity that may conflict
R17, may conflict with their independence of with their independence of judgment or integrity in
Decision judgement or integrity in relation to relation to the categories of activities for which they
(EC) conformity assessment activities for which are designated.
768/2008 they are notified. This shall in particular
apply to consultancy services.
Article Conformity assessment bodies shall ensure 61 A technical service shall ensure that the activities of
R17, that the activities of their subsidiaries or its subsidiaries or subcontractors do not affect the
Decision subcontractors do not affect the confidentiality, objectivity or impartiality of the
(EC) confidentiality, objectivity or impartiality of categories of activities for which it has been
768/2008 their conformity assessment activities. designated.
Article The impartiality of the conformity 61 The impartiality of the Technical Services, their top-
R17, assessment bodies, their top level level management and the assessment personnel
Decision management and of the assessment shall be guaranteed.
(EC) personnel shall be guaranteed.
768/2008
Article The remuneration of the top level No provisions
R17, management and assessment personnel of a
Decision conformity assessment body shall not
(EC) depend on the number of assessments
768/2008 carried out or on the results of those
assessments
84

Art. Text Art. Text
Article 64 An accredited in-house technical service of a
An accredited in-house body shall constitute
R21 manufacturer may be designated only for category A
a separate and distinct part of the
Decision activities with regard to technical requirements for
undertaking and shall not participate in the
(EC) which self-testing is allowed by a delegated act
design, production, supply, installation, use
768/2008 adopted pursuant to this Regulation.
or maintenance of the products it assesses.
That technical service shall constitute a separate and
distinct part of the undertaking and shall not be
involved in the design, manufacturing, supply or
maintenance of the vehicles, systems, components or
separate technical units it assesses.
Article An accredited in-house body shall meet the 64 An accredited in-house technical service shall meet
R21 following requirements: the following requirements:
Decision (a) it shall be accredited in accordance with (a) in addition to being designated by the approval
(EC) Regulation (EC) No 765/2008; authority of a Member State it shall be accredited by
768/2008 (b) the body and its personnel shall be a national accreditation body as defined in point 11 of
organisationally identifiable and have Article 2 of Regulation (EC) No 765/2008 and in
reporting methods within the undertaking of accordance with the standards and procedure
which they form a part which ensure their referred to in Article 65 of this Regulation;
impartiality and demonstrate it to the (b) the accredited in-house technical service and its
relevant national accreditation body; personnel shall be organisationally identifiable and
(c) neither the body nor its personnel shall have reporting methods within the undertaking of
be responsible for the design, manufacture, which they form part which ensure their impartiality
supply, installation, operation or and demonstrate it to the relevant national
maintenance of the products they assess nor accreditation body;
shall they engage in any activity (c) neither the accredited in-house technical service
that might conflict with their independence nor its personnel shall engage in any activity that
of judgment or integrity in relation to their might conflict with their independence of judgment
assessment activities; or integrity in relation to the categories of activities
(d) the body shall supply its services for which they have been designated;
exclusively to the undertaking of which it (d) the accredited in-house technical service shall
forms a part. supply its services exclusively to the undertaking of
which it forms part.
Article 3. An accredited in-house body shall not be 64 3. An accredited in-house technical service need not
R21 notified to the Member States or the be notified to the Commission for the purposes of
Decision Commission, but information concerning its Article 67, but information concerning its
(EC) accreditation shall be given by the accreditation shall be given by the undertaking of
768/2008 undertaking of which it forms a part or by which it forms part or by the national accreditation
the national accredit body to the designating approval authority at the
request of that authority.EN 2.3.2013 Official Journal
of the European Union L 60/87
Article The Commission shall ensure that Reference to Regulation (EC) 765/2008
R30 appropriate coordination and cooperation
Decision between bodies notified under … [the
(EC) relevant act or other Community legislation]
768/2008 are put in place and properly operated in the
form of a … [sectoral or cross sectoral] group
or groups of notified bodies.
Policy Area D – Post market safeguard measures
Article 1. Where the market surveillance authorities 46 Where the market surveillance authorities of one
R31, of one Member State have taken action Member State have taken action pursuant to Article
Decision pursuant to Article 20 of Regulation (EC) No 20 of Regulation (EC) No 765/2008, or where they
(EC) 765/2008, or where they have sufficient have sufficient reason to believe that a vehicle,
768/2008 reason to believe that a product covered by system, component or separate technical unit
this [Act] presents a risk to the health or covered by this Regulation presents a serious risk to
safety of persons or to other aspects of the the health or safety of persons or to other aspects of
protection of public interests covered by this the protection of public interests covered by this
85

Art. Text Art. Text
Regulation, the approval authorities shall Regulation, the approval authority that granted the
carry out an evaluation in relation to the approval shall carry out an evaluation in relation to
product concerned covering all the the vehicle, system, component or separate technical
requirements laid down in this unit concerned covering all the requirements laid
[Act]. The relevant economic operators shall down in this Regulation. The relevant economic
cooperate fully with the market surveillance operators shall cooperate fully with the approval
authorities. and/or market surveillance authorities.
Article Where, in the course of that evaluation, the 46 Where, in the course of that evaluation, the approval
R31, market surveillance and/or approval authority that granted the approval finds that the
Decision authorities find that the product does not vehicle, system, component or separate technical unit
(EC) comply with the requirements laid down in does not comply with the requirements laid down in
768/2008 this [Act], they shall without delay this Regulation, it shall without delay require the
require the relevant economic operator to relevant economic operator to take all appropriate
take all appropriate corrective action to bring corrective action to bring the vehicle, system,
the product into compliance with those component or separate technical unit into
requirements, to withdraw the product from compliance with those requirements, to withdraw the
the market, or to recall it within a reasonable vehicle, system, component or separate technical unit
period, commensurate with the nature of the from the market, or to recall it within a reasonable
risk. The market surveillance authorities shall period, commensurate with the nature of the risk.
inform the relevant notified body
accordingly.
Article Where the approval authorities consider that 46 Where the approval authorities consider that non-
R31, non-conformity is not restricted to their conformity is not restricted to their national territory,
Decision national territory, they shall inform the they shall inform the Commission and the other
(EC) Commission and the other Member States of Member States of the results of the evaluation and
768/2008 the results of the evaluation and the action the action required of the economic operator.
required of the economic operator.
Article Community Safeguard Procedure 47 Where, during the procedure set out in Article 46(3)
R32, 1. Where, during the procedure set out and (4), objections are raised against a measure taken
Decision above, objections are raised against a by a Member State, or where the Commission
(EC) measure taken by a Member State, or where considers a national measure to be contrary to the
768/2008 the Commission considers a national Union legislation, the Commission shall without delay
measure to be contrary to the legislation evaluate the national measure after consulting
of the Union, the Commission shall without Member States and the relevant economic operator
delay evaluate the national measure after or operators. On the basis of the results of that
consulting Member States and the relevant evaluation, the Commission shall decide, in
economic operator or operators. On the accordance with the examination procedure referred
basis of the results of that evaluation, the to in Article 73(2), whether the national measure is
Commission shall decide whether the considered justified or not.
national measure is justified or not.
The Commission shall communicate its decision to all
The Commission shall address its decision to
Member States and to the relevant economic
all Member States and to the relevant
operator or operators.
economic operator or operators.
Article If the national measure is considered 47 If the national measure is considered justified by the
R32, justified, all Member States shall take the Commission, all Member States shall take the
Decision measures necessary to ensure that the non- measures necessary to ensure that the non-compliant
(EC) compliant product is withdrawn from their vehicle, system, component or separate technical unit
768/2008 market, and shall inform the Commission is withdrawn from their market, and shall inform the
accordingly. If the national measure is Commission accordingly.
considered unjustified, the Member State If the national measure is considered unjustified, the
concerned shall withdraw the measure. Member State concerned shall withdraw or adapt the
86

Art. Text Art. Text
measure, in accordance with the decision referred to
in paragraph 1
Policy area E – Procedures for ensuring conformity of production
Annex II, The manufacturer shall lodge an application No provisions
Decision for assessment of his quality system with the
(EC) notified body of his choice.
768/2008
Annex II, The notified body shall assess the quality No provisions
Decision system.
(EC)
768/2008
Annex II, The manufacturer shall draw up a written 38 The manufacturer, in its capacity as the holder of a
Decision declaration of conformity for each product vehicle type-approval, shall deliver a certificate of
(EC) model and keep it at the disposal of the conformity as a paper document to accompany each
768/2008 national authorities for 10 years after the vehicle, whether complete, incomplete or completed,
product has been placed on the market. The which is manufactured in conformity with the
declaration of conformity shall identify the approved vehicle type.
product model for which it has been drawn
up.
The manufacturer shall, for a period ending 38 For a period of 10 years after the production date of
at least 10 years after the product has been the vehicle the vehicle manufacturer shall, at the
placed on the market, keep at the disposal of request of the vehicle owner, issue a duplicate of the
the national authorities: certificate of conformity against a payment not
the application for initial assessment and any exceeding the cost of issuing it. The word ‘duplicate’
changes to the quality system, audit reports shall be clearly visible on the face of any duplicate
by the notified body and reports from certificate.
unexpected visits by the notified body
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FRAMEWORK CONTRACT ENTR/2008/006

Centre for Strategy & Evaluation Services

1. Introduction and methodology 1

2. Background and analysis of automotive sector 7

3. Analysis of the impacts of the policy measures 36

4. Assessment of the need for an advanced study - Proposal 65

5. Conclusions and recommendations 68

A. PRODCOM/UN ComTrade product codes 72

C. Comparison of NLF and Motorcycles Regulation 168/2013 provisions 78

Introduction and methodology 1

1.1 Resume of Assignment Aims

1.2 Methodological framework and research tools

Introduction and methodology 1

Introduction and methodology 1

Introduction and methodology 1

Introduction and methodology 1

1.3 - Structure of the Report

 Appendix A – Relevant PRODCOM and UNCTAD product Codes

Introduction and methodology 1

2. Background and analysis of automotive sector

2.1 - Brief description of the policy context

2.2 - Analysis of the automotive sector structure

Tyres Production Tyres Consumption

Source: OICA (2012)

Motor vehicles 10,026 0.4% 0.2% 0.5% 1.7% 97.2%

USA 4.5% 2.6% 1.8%

Manufacturing total motor vehicles Manufacturing total motor vehicles

Source: Casesa & Co., JD Power LMC Forecast.

Source: Eurostat and own elaboration

2.3 - Developments in the automotive sector

2.4 - Analysis of cost structures in the automotive sector

Source: EPA, 2009

Competitiveness proofing analysis 3

3. Analysis of the impacts of the policy measures

3.1 - Attention area A: Traceability of products and responsibilities of economic operators

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Distributors and importers of vehicles and components

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3

Competitiveness proofing analysis 3