1.Procedural issues and consultation of interested parties 

1.1.Identification 

Lead DG: ENTR

Other involved DGs: SG, SANCO, CLIMA, MOVE, ENV, RTD

Agenda Planning/WP Reference: 2011/ENTR/011

1.2.Organisation and timing

Work on this impact assessment started in 2010 with the preparation of the Impact Assessment Roadmap and the setting up of the steering group to which representatives of following DGs were invited: SG, SJ, ECFIN, ENV, MOVE, SANCO, TRADE, RTD. The steering group met 3 times in September and October 2010 and in October 2011. This steering group also monitored the fitness check pilot project on the type-approval framework for motor vehicles, and was extended with a representative of DG CLIMA. In that capacity the Steering Group met 4 times in March, May, July and November 2012, and the DGs concerned were also consulted in July 2013 on the draft Commission staff working document on the fitness check. Another meeting of the IA Steering Group took place on 30 January 2014 to discuss the draft Impact Assessment Report.

1.3.Consultation and expertise

A public consultation was held from 7 December 2010 to 16 February 2011. For this purpose, a dedicated consultation web-page 1 was set up and the Commission services prepared a consultation document, which was discussed and agreed with the IA Steering Group. The aim of this public consultation was to verify whether the five areas identified by the Commission services as having a potential for improving the enforcement of EU type-approval legislation for motor vehicles would provide the right scope and focus for the envisaged review of Framework Directive 2007/46/EC.

Forty relevant responses 2 were received which, overall, indicated a strong support for the aims of the initiative. Whilst 74% of the respondents concurred that the current type-approval framework was already of fairly high quality, 57.6% of them considered that nonetheless more could be done to emphasise and properly focus the legal application of market surveillance principles, with 47% of respondents saying that existing market surveillance principles are ineffective, while just 2.9% agreed it was effective. This outcome clearly demonstrates that stakeholders share the view that more can and should be done to complement the ex-ante controls offered by the type-approval framework with ex-post market surveillance provisions 3 .

The Commission services also commissioned a number of external studies to accompany and feed in to the Impact Assessment process. An ex-post evaluation (EPE) study on the framework directive 2007/46/EC was carried out in the first half of 2011 4 , followed by an impact assessment (IA) study in the second half of 2011 5 .

This study assessed the impact of the possible options developed for each of the five problem areas identified by the Commission services and which were confirmed to be relevant by the public consultation. Based on the results of the public consultation and the IA study, a preferred combination of policy options for these five areas has been identified.

Further work on the impact assessment and the preparation of the review of the Framework Directive was put on hold in 2012/2013 when the regulatory framework for the type-approval of motor vehicles was selected by DG ENTR for running a fitness check (FC) pilot project. A study contract has been awarded for that purpose and the FC study has been finalised in March 2013 6 . A Commission Staff working document reporting on the outcome of the fitness check pilot project was published in November 2013 7 , highlighting the priorities for the envisaged revision of Directive 2007/46/EC.

Finally, and in line with the commitments the European Commission made in its CARS 2020 Action Plan, a competitiveness proofing (CP) study has been run in the second half of 2013 to complement the above mentioned actions 8 . The need for mitigating measures for SMEs has been considered in the context of this study, which demonstrated that for the options retained there would not be any significant impacts for the SMEs in the sector to the extent that mitigating measures would be necessary. Micro enterprises have not been considered as there is no evidence available that any such enterprises operating in these sectors would likely be affected by the envisaged measures.

Stakeholders have been continuously informed and involved in all the above mentioned studies.

High level involvement of stakeholders has taken place in the context of the CARS 21 High Level Group, resulting in a number of recommendations in relation to the type-approval framework that have been taken up by the Commission in its CARS 2020 Action Plan adopted in November 2012 9 .

In addition, specific exchanges with Member States' authorities have taken place during the entire impact assessment process at meetings of the Technical Committee Motor Vehicles (TCMV) and the Type-Approval Authorities Experts Group (TAAEG). Exchange of views with industry and user associations about the initiative have taken place in the framework for the Motor Vehicles Working Group (MVWG). All stakeholders have also been consulted by the external study contractors for the collection of data and views.

This extensive consultation process has enabled stakeholders to express their positions, which have been taken into account for the identification, assessment, comparison and final selection of the preferred combination of policy options. It also enables to conclude that the Commission's minimum consultation standards have been met.

1.4.Scrutiny by the Commission Impact Assessment Board

The Impact Assessment Board of the European Commission assessed a draft version of the present impact assessment and issued its opinion on 28 March 2014. The Impact Assessment Board made several recommendations and, in the light of the latter, the final impact assessment report:

Has been redrafted to highlight that this impact assessment is mainly based on a qualitative rather than a quantitative approach. The main reason being that the data that could be collected to build a quantitative assessment were limited and not sufficiently robust to draw reasoned conclusions. The second reason is that the main objective of this initiative is to improve the effectiveness of the current legal framework by streamlining and enhancing procedures and processes, rather than to introduce new safety and environmental requirements to be complied with. It has proven difficult to quantify in a reliable manner the impact of such procedural changes, as no or very little data are available. Nevertheless an attempt for a quantitative assessment has been made to provide a rough idea about the order of magnitude of the benefits that could be generated by improving these processes and procedures. However, as these estimates are building on assumptions about the likely reduction of the presence on the market of non-compliant products and products that represent a serious risk, and are mainly based on stakeholders' views, they are not sufficiently precise to be used as a basis for comparison with the estimated costs the proposed changes to the framework may entail. For these reasons these quantitative estimates have been shifted to the Annexes of this Impact Assessment Report and are provided for information only.

Clarifies better the causes of the problems and their impacts. It also describes more in detail the extent to which the proposed options are based on the provisions of existing horizontal legislation (New Legislative Framework) or provide tailor-made, sector specific, solutions.

2.Context

2.1.General political and regulatory context: See Annex 4

2.2.Specific regulatory context

The legal framework for the type-approval 10 of automotive products covers three categories of vehicles: motor vehicles and their trailers, motorcycles (two and three-wheelers as well as certain quadri-cycles), and agricultural or forestry tractors. The scope of this impact assessment is limited to the legal framework for the type approval of the first category of vehicles (motor vehicles and their trailers) since the legal framework for the two other vehicle categories has been the subject of a major overhaul in 2013 11 .

The legal framework for the type approval of motor vehicles aims at facilitating the free movement of automotive products in the internal market by laying down common requirements designed to achieve environmental and safety objectives which are specified in several separate legal acts. These legal acts deal with a multitude of detailed technical requirements for different vehicle systems and components and are frequently updated to adapt them to technical progress while at the same time minimising the regulatory burden on industry.

The EU type-approval framework has been significantly revised over the recent years, mainly with the aim to achieving simplification and alignment with the international regulatory framework established by the United Nations’ Economic Commission for Europe (UNECE).

Over time, also new requirements have been introduced to increase the level of safety, environmental protection and energy performance of motor vehicles. As a result, the EU type-approval 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.

The cornerstone of this type-approval legislation is Directive 2007/46/EC, which provides the framework under which the separate legal acts with specific safety and environmental requirements are operating. An ex-post evaluation, carried out in 2011, concludes that the Directive has proven its relevance. However, from the analysis also emerged that there are still problems with unsafe and/or non-compliant automotive products being placed on the market in the EU. The analysis pointed out that the effectiveness of the Directive relies significantly on the quality and the performance of technical services 12 (TS) and also on their ability to ensure proper verification of the conformity of production (CoP) arrangements. These findings are particularly relevant for the envisaged review of Directive 2007/46/EC, since addressing these particular issues will contribute to the main objective of further enhancing the functioning of the internal market for automotive products.

A more holistic ex-post evaluation was carried out in 2012 by means of a Fitness Check (FC) pilot project, in which not only framework directive 2007/46/EC has been assessed, but also all other main pieces of automotive internal market legislation which are closely interlinked with this Directive. The FC confirmed that the EU type-approval legal framework is appropriate for achieving the main goals of harmonisation, effective operation of the internal market and fair competition. However, differences in interpretation and strictness in application of the requirements across Member States (MS) are reducing the effectiveness of the framework. The Commission Staff Working document on the FC acknowledges room for improvement and singles out the review of Directive 2007/46/EC as a matter of priority, with as subjects of main focus:

–the introduction of market surveillance provisions to complement the type-approval requirements;

–the clarification of its recall and safeguard procedures;

–the suitability of alternative type-approval schemes in providing appropriate flexibility for niche markets and SMEs; and

–the need to harmonise and enhance the type-approval and conformity of production procedures applied by MS authorities and technical services, and to clarify their roles and responsibilities.

2.3.Scope of the initiative:

The scope of this initiative is limited to the legal framework for the type approval of motor vehicles and their trailers, which is currently governed by Directive 2007/46/EC (See "basic directive" in the figure below). Under this framework seven separate Regulations have been adopted, which are the main technical acts setting out the relevant environmental and safety requirements automotive products have to comply with under this framework.

2.4.Purpose of this initiative:

The main purpose of this initiative is to enhance the implementation and enforcement of the legislative framework for the free movement of motor vehicles.

The introduction of market surveillance, based on the solutions offered by the NLF and adapted where necessary to take account of the specificities of the automotive sector, is considered to address the areas identified as having a potential for improvement.

As explained in Annex 4 this approach will build - to the greatest extent possible – on the reference provisions of the NLF "toolbox" Decision 768/2008/EC and will aim to achieve the highest level of coherence with the recently revised type-approval legislation for L-category and T-category legislation, and in particular with the newly introduced provisions on market surveillance in these two new Regulations. These market surveillance provisions have also been based on the NLF, but have been adapted during the inter-institutional discussions to take account of the specificities of the automotive sector. In particular the fact that the current internal market legislation is based on a rigorous ex-ante control system before automotive products can be placed on the market requires an adaptation of the generic provisions on market surveillance, to ensure that ex-post controls carried out in the context of market surveillance activities take duly into account that automotive products must be type-approved before being placed on the market. This implies that clear provisions are necessary to ensure proper and efficient information exchange and co-operation between market surveillance authorities and type-approval authorities, and that the pivotal role and responsibilities of the type-approval authorities have to be recognised.

The key driver for this initiative is therefore to provide tailor-made solutions for complementing the type-approval requirements (ex-ante controls) with market surveillance provisions (ex-post controls), whilst aiming at ensuring the highest level of coherence with the approaches that have been followed for introducing market surveillance provisions in the type-approval framework for motor cycles and tractors.

2.5Links with other initiatives:

The NLF is currently being reviewed in the context of the Product Safety and Market Surveillance Package (PSMSP). Annex 4 provides more details why this initiative has not been taken into account for the review of the legal framework for the type-approval of motor vehicles.

2.6Key features of the sector concerned 13 :

The EU automotive sector has an annual turnover of around €800 billion, of which the part associated with “industrial activities” (excluding services and trading) is around €640 billion 14 .

Of this total for industrial activities, the manufacture of motor vehicles, trailers and semi-trailers accounts for around €440 billion, and the manufacture of parts and accessories accounts for around €200 billion. The latter amount can be further separated to distinguish the market share between original equipment parts and aftermarket parts (See figure below).

(Source: IA study, based on analysis of EUROSTAT data (pp 10 + 11))

3.Problem definition 

3.1.The problem that requires action

This initiative aims at addressing the problem of non-compliant or unsafe automotive products 15 still found on the market, despite the existence of an EU legal framework based on an ex-ante control of the safety and environmental performance of automotive products before they can be placed on the market.

3.1.1.Stakeholders' views on the problems requiring action:

The importance of the problem has been recognised in the context of the public consultation, as more than 75% of the respondents indicated to have knowledge of/or experience with non-compliant and/or unsafe automotive products on the EU market.

More than 80% of the respondents consider that this problem is leading to a distortion of competition between economic operators, poses serious challenges to the enforcement of the current legislation and has significant negative impacts on our society (health and safety, environment). So respondents to the public consultation appear to have a commonly shared understanding of this regulatory failure (see table IPM.1 in Annex 1).

With regard to the current legal framework and its procedures for taking actions against non-compliant and unsafe automotive products across the EU market, 47% consider these neither effective nor sufficient, against 41% considering them effective and sufficient. These results clearly indicate the acknowledgement of another regulatory failure, which is confirmed by the fact that more than 76% of respondents agree or agree fully on the need for increasing the focus on market surveillance, against 12% disagreeing. (see table IPM.2 in Annex 1)

From the replies to the EPE study questionnaire appeared that the majority of respondents equally acknowledged that there exists a problem with unsafe automotive products being placed on the EU market, considering it to be serious or even highly serious. Only a minority of the national authorities consider this not to be a problem (see table EPE.1 in Annex 1).

With regard to the estimated size of the problem with non-compliant and unsafe products, half of the national authorities responding to the to the ex-post evaluation study questionnaire and considering the problem of unsafe products to be serious, believe that unsafe automotive products account for less than 10% of automotive products on the market, while the other half believe that unsafe automotive products account for more than 25% of automotive products (see table EPE.2 in Annex 1).

A similar pattern emerged with regard to the problem of non-compliant automotive products being placed on the market, with no single corresponding stakeholder considering this is not a problem (see table EPE.3 in Annex 1).

As for the estimated size of the problem with non-compliant products the replies to the ex-post evaluation study questionnaire provided a similar pattern as for the problem of unsafe products (see table EPE.4 in Annex 1).

3.1.2.Possible reasons for the problems identified:

Although the existence of the problem is widely recognised, there are no reliable data available that would enable to identify to which extent the presence of unsafe and non-compliant products on the market can be attributed to general irregularities (e.g. due to lack of awareness about the applicable requirements) or to genuine illegal activities (e.g. intentional trespassing of the rules or circumventing the requirements) 16 .

In view of this limitation, the approach followed for identifying the problem drivers and selecting policy options that could contribute to minimising the occurrence of such problems has been based on a detailed assessment of the current provisions of the legal framework and their effectiveness in avoiding such problems occurring (see § 3.1.7 for further details). The overall result of this assessment was that on the one hand a number of the type-approval procedures and requirements needed to be strengthened and on the other hand that these type-approval requirements needed to be complemented with market surveillance provisions to ensure that whenever problems with unsafe or non-compliant automotive products on the market occur, adequate remedial action can be taken.

These relatively high percentages can be explained to a very large extent by the fact that the vast majority of recalls in the automotive sector are of a voluntary nature and are undertaken by the manufacturer to address quality issues, which not necessarily have a bearing on safety or environmental performance and therefore on the compliance of the product with the relevant requirements of the type-approval framework. As the problem drivers have been identified to select the policy options that would enable to enhance the type-approval framework, it is to be expected that still a large percentage of the automotive recalls will not be avoided by addressing the problem drivers. It is therefore important to ensure that the procedures for recalls are maintained in the type-approval framework and further clarified and strengthened to ensure that the recall procedures provide a meaningful and complementary tool to protect citizens from the safety risks that automotive products may represent despite the fact that they comply with the type-approval requirements

3.1.3.Problem drivers:

The Commission services have – in consultation 17 with the Member State authorities responsible for the enforcement of the type-approval legislation - singled out five problem drivers having a potential to correct the regulatory failures. Three of these problem drivers can be directly associated with the requirements of the type-approval legislation as such (areas C,D and E), whilst the other two relate to the overall need to enhance the implementation and enforcement of the type-approval framework, by means of complementary measures derived from a comparative analysis of the reference provisions of the NLF "toolbox" decision and taking into account the approach that has been followed for the introduction of market surveillance provisions in the parallel Regulations on the type-approval and market surveillance for motorcycles and tractors. (see areas A and B below) 18 .

A)Difficulties to trace the origin of non-compliant and unsafe products encountered on the market and lack of clarity about the respective responsibilities of economic operators involved in the supply chain for such products:

Currently, traceability is not ensured throughout the whole supply distribution chain. Directive 2007/46/EC requires only that for the purpose of type-approval the manufacturer or his authorised representative is identified, but there are currently no legal means available to identify the other economic operators in the distribution chain - such as importers and distributors - let be to hold them accountable for the safety and compliance of the products they are placing on the market. These operators are, however, important contact and information points for the enforcement authorities, in particular when the manufacturer is not established in the EU.

This lack of information to identify and trace the origin of non-compliant and unsafe products on the market and 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 effective remedial action against non-compliant products and economic operators not respecting the rules.

The difficulty to trace products and the responsible economic operators has also been recognised and highlighted in the Impact Assessment Report accompanying the proposals for the New Legislative Framework 19 . Globalisation is mentioned as one the reasons why it has become increasingly difficult to determine how and by whom a product is manufactured or who has placed it on the market.

The IA report for the NLF mentions that often enforcement authorities cannot find the economic operator from whom the necessary information about the safety and compliance of the product can be obtained and who could be held accountable for ensuring that mitigating measures are taken to remedy the non-compliance or the safety risk.

B)Lack of clarity about the respective responsibilities of and the co-operation between the different national authorities that may be involved in the enforcement of the technical harmonisation legislation for the free movement of motor vehicles (in particular type-approval-, market surveillance- and border control authorities):

The current type-approval legislation focuses mainly on pre-market control procedures for type-approval and the conformity of production, and therefore defines and refers exclusively to type-approval authorities and the competent authorities for the assessment and designation of technical services. However, for the purpose of addressing post-market problems with non-compliant and unsafe products, and in particular for the application of the procedures for safeguard measures and the recall of vehicles, the respective roles and responsibilities of other authorities which may be involved in the implementation and enforcement of the legislation are not clearly defined and streamlined.

The lack of exchange of information and co-operation between enforcement authorities from the different Member States has also been highlighted in the IA Report accompanying the proposals for the NLF package. As the competence of the enforcement authorities is limited to their national territory, the functioning of the Internal Market in terms of ensuring that only compliant and safe products can be placed on the market is determined by the weakest link in the chain. Weaknesses in the organisation of enforcement in one single Member State can seriously undermine the efforts by others to keep non-compliant and unsafe products from the market.

Where remedial action is needed beyond the national border, enforcement authorities must be able to rely on co-operation and exchange of information with their colleagues in the other Member States. The absence or poor functioning of such exchange of information and co-operation hampers an effective and uniform enforcement of automotive legislation across the EU. The existing fora for exchange of information between type-approval authorities of the Member States 20 are mainly addressing issues related to the interpretation of the type-approval requirements and procedures specified in the legislation, but are not suited for exchange of information and co-operation between enforcement authorities on issues related to non-compliant and unsafe automotive products (as not all enforcement authorities are represented).

C)Divergence in quality of the type-approval and conformity assessment tasks carried out by technical services:

Technical services are a key player in the type-approval process and for verifying that manufacturers ensure an adequate level of conformity of production. Varying degrees of stringency and quality standards applied by technical services are issues that have emerged from the public consultation and the EPE study, and are considered to contribute substantially to hampering the harmonised implementation of the type-approval legislation.

Around 50% of the technical services and national authorities responding to the ex-post evaluation study questionnaire considered that the effectiveness of refusal or withdrawal of type-approval has been reduced by ‘type-approval hopping’
(i.e. economic operators selecting more lenient type-approval authorities over more stringent authorities) and ‘selective selection of type-approval authority’ (i.e. automotive products for which type-approval has been refused or withdrawn being presented to other technical services and/or authorities to obtain type-approval).

D)Lack of clarity and harmonisation in the post-market safeguard procedures and the provisions for the recall of vehicles:

Currently the recall provisions in article 32 of the FWD refer in general terms to the General Product Safety Directive.

The FWD however does not provide clarity on how the different authorities who could be involved in the procedure should co-operate. For instance, when a border control authority in one Member State would encounter a non-compliant product, there are no clear provisions in the type-approval legislation describing how and to which other concerned authorities in the same or other Member State(s) this should be reported.

Under the GPSD, as well as under NLF Regulation (EC) No 765/2008, MS have an obligation to notify measures taken against products which pose a safety risk for the health and safety of consumers and other users, and/or to the environment. The IA report for the PSMS package reports that only 44% of MS fully comply with this obligation. It also refers to shortcomings in the practical implementation of the safeguard clause procedure. According to the NLF Regulation all compulsory safeguard measures taken by Member States against products which are covered by Union harmonisation legislation and which are presenting a risk have to be notified to the Commission. The data regarding the number of safeguard notifications under Directive 2007/46/EC indicate that the safeguard clause has never been invoked. In contrast, the RAPEX 21 notifications concerning recalls in the motor vehicles sector indicated that all recalls, without exemption, were of a voluntary nature 22 .

In addition, the post-market safeguard procedures and the information procedures provided for the recall of vehicles in the current motor vehicle type-approval legislation are specified in a general manner as obligations for Member States, without addressing the respective competences of the different national authorities that may be involved. As such, they do not take into account the involvement of market surveillance and custom authorities and the valuable contribution they can make to an effective enforcement of the relevant legislation to ensure that any remedial action undertaken will guarantee an adequate solution to the safety, environmental or compliance problem encountered.

E)Shortcomings in the legal provisions for ensuring conformity of production:

The procedures for ensuring conformity of production are an indispensable part of the overall type-approval process since they aim at ensuring that all vehicles are produced in accordance with the approved type and as such also comply with the applicable requirements. Therefore, they constitute a very important connecting link between the ex-ante type approval procedure and the ex-post market surveillance activities, and – if properly specified and implemented - a powerful tool in minimising the risk of non-compliant products being placed on the market and the need for restrictive post-market actions to remedy the problems associated with such products.

The current CoP provisions, however, give too much room for diverging interpretation and application. In particular weaknesses in the criteria for the assessment of the quality assurance system to be set up by the manufacturer and for the frequency of periodical audits and the possibility of unexpected visits to the manufacturers' premises to verify the conformity of production arrangements result in a varying degree of rigour applied by enforcement authorities. As an example, the current provisions for establishing the frequency of periodical audits are based on "the climate of trust between the manufacturer and the approval authority".

3.1.4.Stakeholders' views on problem drivers:

From the public consultation emerged that respondents acknowledge these five problem drivers as being relevant. Only for problem driver D concerning the procedures for safeguard measures and recalls this acknowledgement is less outspoken (see table IPM.3 in Annex 1).

From the EPE study emerged that the majority of national authorities responding expected that developments or changes in the market for motor vehicles are likely to either increase or significantly increase the importance associated with four of the five problem drivers. (See table EPE.5 in Annex 1). The only exception is problem driver B ‘responsibilities of and co-operation between the different national authorities within the Member States involved in the enforcement of the legislation’, for which the majority of national authorities responding to this question believe that changes in the market will not affect the significance of this area.

Specific issues raised by national authorities include:

–concerns regarding the further opening of the global market for technical services. Conflicts between their role in conducting type approval testing and reporting on the one hand and competition between technical services to secure clients on the other could lead to some TS producing approval work of questionable quality; and

–increased harmonisation through information exchange and co-operation,, which will mean that each national authority will get more cases to manage (including cases in other countries).

Most technical services responding to the EPE study questionnaire indicated that expected developments or changes in the market for motor vehicles are likely to increase the importance associated with three of the five problem areas; the difference between these technical services expecting an increase and those that predict no change is, however, marginal (60:40). A marginal difference (60:40) in favour of no change can also be seen in the area of “quality and performance of technical services”. The clearest indication is in problem area A for which 80% of responding TS expects an increase or significant increase in importance due to market changes.

Economic operators who responded to the questionnaire of the EPE study expect no changes to occur with regards to three of the five problem areas. However, for the quality and performance of technical services as well as for the traceability of products and responsibilities of operators, 33% of the respondents expect an increase in importance due to market changes.

Consumer organisations replied that expected developments/changes in the market for motor vehicles are likely to increase the importance of each of the five identified problem areas.

3.1.5.Specific needs for action:

In addition to these five problem areas identified and discussed above, some more specific issues may need to be addressed as well. Recent problems associated with the implementation of the MAC Directive (Directive 2006/40/EC) 23 have revealed the need to bring greater clarity in the type-approval framework for motor vehicles with regard to the conditions for granting extensions to type-approvals for existing types of vehicles. Situations encountered such as the same vehicle model being approved at the same time as a "new type" and as an "existing type" through an extension of an existing type-approval result in legal confusion and could in some cases be perceived as a way to circumvent compliance with new requirements that have come into force for new vehicle types.

Also the current safeguard procedures, which are designed on the assumption that the type-approval authority who issued the approvals for a type of vehicle would take timely and appropriate remedial action whenever the type of vehicle would be found not to comply with the requirements may need to be revised to address also those cases where no such appropriate and timely remedial action would have been taken by the issuing type-approval authority. In particular the rights and obligations of the other Member States and the role of the Commission in such cases may need to be clarified (this issue is linked to problem area D).

3.1.6.Link between policy objectives, problem drivers, problems and consequences:

Annex 5 provides a schematic presentation of the links between the problem and its drivers, as well as the resulting consequences. It also provides an overview of the policy objectives that have been identified to remedy/reduce the problem and which will be described in more detail in the section s below.

3.1.7.Estimated size of the problem:

For estimating the size of the problem it is important to make a distinction between non-compliant and unsafe automotive products.

Non-compliance refers to the situation where the automotive products covered under the FWD do not meet the safety or environmental requirements set out in the specific technical acts adopted under this framework legislation.

Reference to unsafe automotive products is made in the context of recalls of automotive products which present a “serious risk to road safety, public health or environmental protection” (irrespective of whether they are compliant or not).

The exact proportion of non-compliant and unsafe automotive products on the EU market is not known. However, the consultation of stakeholders in the context of the EPE study provided some estimates of the market share for non-compliant and unsafe products. These estimates have been used as a basis for attempting to quantify the possible benefits that could be generated by the envisaged policy options in reducing the market share of unsafe and non-compliant products. More details on this attempt for a quantitative assessment are provided in Annex 8.

3.1.8.Current tools and their shortcomings to address the problem:

The current tools available are mainly based on ex-ante compliance verification through type-approval combined with conformity of production arrangements. They have been built on the mutual confidence between all stakeholders involved and may have been sufficient for an automotive market where the major players were mainly established in the European Union and hence compliance with safety and environmental requirements could reliably be ensured with this approach. However, the global automotive market is changing drastically: its centre of gravity is shifting to emerging countries, and the EU manufacturers are increasingly faced with fierce global competition. These developments have also an impact on the way the authorities in the Member States and the Commission services need to organise themselves to continue ensuring that automotive products placed on the EU market – and in particular those imported into the EU – comply with the safety and environmental requirements of the type-approval legislation.

In addition, the fierce competition on the global automotive market is also having an impact on the way manufacturers are addressing safety quality control issues. Data from the RAPEX system indicates a rising trend in the number of notifications on recalls in the motor vehicle sector over the last decade. (See graph below)

2005    2006    2007    2008    2009    2010    2011    2012

A review of the RAPEX annual reports for the past 5 years indicates that motor vehicles (including motorcycles) account for between 8 and 15% of notifications of products presenting a serious risk as shown in the table below.

As such, motor vehicles are ranked in the top five of most frequently notified product categories in RAPEX 24 .

The problems that have prompted these recall actions indicate that automotive products which are placed on the market can give rise to some safety or environmental risks even when they comply with the applicable type-approval requirements.

It should be noted that all of these recalls have been notified as being voluntary ones, which may raise the question about the efficiency of the Framework Directive’s provisions on mandatory recalls. The concern most commonly raised is that these provisions are not sufficiently clear and firm, resulting in different procedures and criteria being adopted by different Member States. For instance, it is reported that some vehicles may be recalled in some MS but not in others. Further to that, a number of MS consider that the process can be rather slow and complicated in situations where the type approval has been issued by another Member State.

The recent problems arising from the implementation of the MAC Directive raise the question about the need to enhance the recall system in the legal framework with a view to better ensure common minimum levels of consumer protection and health and safety standards across the EU.

The experience with recent recall actions has demonstrated so far that the procedure established by the automotive framework legislation for the exchange of information on the remedial measures taken appears to function properly. However, it has at the same time highlighted that the respective roles of the authorities and economic operators involved need to be better clarified and specified, and that in particular such problems could be better anticipated by increasing the focus on market surveillance.

It should be noted that these problems and needs are not exclusive to the automotive sector but are common to most of the consumer and professional products covered by technical harmonisation legislation, and possible solutions for addressing them have been specified in the NLF. This impact assessment aims at exploring and providing adequate answers to these problems by assessing to what extent the approach followed in other product sectors and harmonised by the NLF could contribute to achieving this objective.

There is however no evidence available that would indicate that the presence of non-compliant and unsafe automotive products on the market could be due to poor enforcement and/or weak administrative capacity in some Member States. From the experience gained and the evidence available emerges that there is rather a need to clarify and strengthen the procedures in the type-approval framework, so as to leave less room for divergence in interpretation and to enhance further harmonisation of the enforcement by the Member States.

It should also be noted that there is no evidence so far that Member States would have failed to comply with their obligation to implement and enforce the FWD in their territory. Therefore it is unlikely that the presence of non-compliant and unsafe automotive products could be attributed to enforcement failures by Member States. Therefore the problem of non-compliant automotive products found on the market cannot be solved by using infringement procedures.

3.2.Who is affected, in what ways and to what extent?

A range of different groups are affected by the market failures and regulatory shortcomings resulting in the presence of non-compliant and unsafe automotive products on the EU market.

–European citizens (vehicle users as well as other road users) are affected by poor safety and environmental performance of motor vehicles in those instances where unsafe and non-compliant automotive products are involved, which are contributing to road accidents and poor air quality, both resulting in harm to personal health.

–Economic operators in the automotive supply chain suffer from an unlevelled playing field and unfair competition from those ignoring or not complying with the rules of the game. Especially EU automotive manufacturers and suppliers may be affected from the unlevelled playing field if the rules cannot equally enforced upon non-EU manufacturers and suppliers.

–National enforcement authorities will be affected by the regulatory shortcomings, putting additional burden upon them to remedy these shortcomings by taking corrective actions against non-compliant and unsafe products on their markets. A lack of cross-border information exchange and co-operation will reduce considerably the effectiveness of such remedial measures, since the problem may be shifted to other Member States where no the same level of rigour against non-compliant and unsafe products is applied 25 .

–Technical services are operating in a competitive environment and are subject to economic pressure from operators in the automotive sector who are keen in obtaining type-approval for their products in the cheapest way possible. This pressure can only be countered if clear and effective criteria are established to safeguard the independence of technical services and to ensure the quality of their type-approval related inspection and testing activities. Otherwise bona fide technical services will suffer from the unlevelled playing field and lose market share to the advantage of those not respecting the criteria 26 .

–SMEs in the automotive sector are the most vulnerable to suffer from the market failures and regulatory shortcomings and particular attention is given to the potential impact the envisaged policy options may have on them.

3.3.EU right to act

The FWD is based on Article 114 of the TFEU and contributes to the implementation of the internal market for goods. Although Member States are responsible for the enforcement of the legislation in their territory, a harmonised and co-ordinated approach based on commonly applicable criteria (such as those as offered by the NLF) and uniformly applied by Member States is essential for ensuring a level playing field across the EU.

The differences in national organisation of type-approval and market surveillance may give rise to a non-harmonised enforcement when viewed in the framework of the European single market which no longer has internal borders and where controls at national borders have practically disappeared. To avoid that non-compliant products circulate on their territory, Member States depend to a large extent on the effectiveness of the enforcement policy of their neighbours. Consequently, weaknesses in enforcement by one single Member State can seriously undermine the efforts taken by other Member States to keep non-compliant products from the market. This interdependence is reinforced by the fact that the competence of enforcement authorities is limited to the national territory. Where action is needed beyond the border, these authorities must rely on their colleagues in other Member States. In view of the global nature of automotive sector, with substantial imports of automotive products from outside the EU, this cross-border dimension is highly important.

If actions were to be taken individually by Member States at national level to address market problems, this may entail the risk of creating obstacles to the free movement of motor vehicles aimed by the automotive product framework legislation. Hence there is clear added value to take action at EU level.

4.Objectives 27

4.1.General policy objectives

The overall policy objective of reviewing Directive 2007/46/EC is to safeguard and strengthen the functioning of the internal market for motor vehicles by ensuring that all necessary mechanisms are in place for an effective and uniform application and enforcement of the type-approval framework legislation.

It aims at ensuring that by means of ex-ante as well as by post-market controls all motor vehicles as well as systems, components and separate technical units intended for such vehicles which are placed on the EU market fulfil the applicable requirements, with a view to ensure a high level of safety and environmental protection, and to provide for adequate procedures to remedy the situation where non-compliant and/or unsafe products would nevertheless have been placed on the market. As such it is contributing to the general policy objectives of enhancing road safety and reducing pollutant and CO2 emissions. Finally it also aims at enhancing the competitiveness of the EU automotive industry, and that a level playing field is maintained for the economic operators involved.

4.2.Specific policy objectives

Three specific objectives are envisaged with this initiative:

–Ensure a better enforcement of the safety and environmental requirements governing the design and construction of motor vehicles and their parts and systems.

–In accordance with the principles of smart regulation, ensure the highest degree of coherence with the recently updated type-approval legislation for motorcycles and tractors and with the reference provisions of the New Legislative Framework.

–Reduce the number of non-compliant and unsafe automotive products on the market.

4.3.Operational policy objectives

Reduce the number of non-compliant and unsafe motor vehicles, systems, components and separate technical units intended for such vehicles being placed on the EU market, by:

–Enhancing the traceability of automotive products;

–Specifying and clarifying the respective responsibilities of the economic operators in the automotive supply chain with regard to the compliance and safety of these products;

–Specifying the respective responsibilities of the different authorities involved in this process, with a view to ensure effective and uniform action against non-compliant and unsafe products across the EU market and the equal treatment of economic operators in the enforcement of the requirements;

–Increasing the credibility of the type-approval tests and inspections by enhancing the criteria for the designation of technical services and for monitoring their performance;

–Ensuring reliable and high-quality type-approvals procedures, including the conformity of production arrangements.

4.4.Consistency with other policies and objectives

The objectives of the envisaged initiative are consistent with the integrated industrial policy for the globalisation era 28 , which is one of the seven flagship initiatives under the Europe 2020 strategy 29 .

The initiative also ties in with the European Commission’s strategic initiative to re-launch the internal market and in particular with its proposals to improve product safety in the EU by strengthening market surveillance in the Member States 30 .

The Commission announced this initiative in its CARS 2020 action plan for the automotive industry as an important initiative to meet its commitments on smart regulation 31 .

5.Policy options 

Building on the problem description in section 3.1, the following policy options have been identified for each of the five problem driver areas.

5.1.Problem driver A: insufficient traceability of automotive products and lack of clarity about responsibilities of economic operators in the supply chain

Three possible policy options have been identified for further assessment:

Option A1 (baseline scenario): business as usual.

Option A2: Introduce voluntary agreements and awareness raising campaigns to improve the overall traceability of automotive products and clarity about the responsible actors in the supply chain.

Option A3: specify legal provisions for the traceability of products and the responsibilities of economic operators in the supply chain.

This could be done at different levels of ambition with regard to the scope, extent of information and technological tools for ensuring traceability being used. The following levels of ambition have been considered:

a)    low ambition level approach: use as a reference the current systems already in place in some parts of the industry.

Currently, each company is regulating individually the identification and traceability of its products, but at the interface between companies it becomes more difficult. There is no clear agreement on delimitation accuracy required for parts and their components, who stores which process/quality data relative to which references, and which references are to be communicated to the customer and linked to the customer’s product.

The question is however whether applying these systems across the automotive product sector could make the traceability processes more transparent and more reliable throughout the supply chain. It should be noted that the systems are used on a voluntary basis mainly for supply chain management purposes and are not tailored to suit the needs of market surveillance. Therefore this option is not taken forward for the further impact assessment.

b)    medium ambition level approach: introduce harmonised product traceability requirements to ensure that automotive products (or their packaging/documentation, due to size/nature of the product) bear a type, batch or serial number or other element allowing their identification. For reasons of coherence and in line with the principles of smart regulation these requirements should be based on the reference provisions of the NLF Decision 32 .

The same principles would apply for specifying the provisions with regard to the identification of the actors in the supply chain and their respective responsibilities in terms of ensuring that the products they are placing on the market are compliant and safe. In line with the NLF provisions, manufacturers established outside the EU would have to appoint an authorised representative for market surveillance provisions. As the type-approval framework already contains a similar provision for type-approval purposes, the manufacturer can use the same representative for both purposes. Importers and distributors would have specific responsibilities with respect to approval and market surveillance as do manufacturers, particularly those that modify or rename (to their own name or trademark) automotive products 33 .

c)    high ambition level approach (going beyond application of NLF provisions): use as a reference for the traceability requirements current high-technology traceability systems for automotive products, such as Radio Frequency Identification (RFID) tags.

RFID is a technology that uses radio waves to transfer data from an electronic tag (which can be attached to an object) to an electronic reader, for the purpose of identifying and tracking the object (using a unique serial number). RFID tag technology is currently used in a wide variety of applications and can be affixed to any object that requires tracking or to assist with inventory management. This technology would be useful for tracking and recording non-compliant and unsafe automotive products on the market.

Due to cost considerations (see section 6.1.2.3.) the high ambition level approach (Option A3c) has to be discarded.

5.2.Problem driver B: lack of clarity about the responsibilities & cooperation of enforcement authorities

Four possible policy options have been identified for further assessment:

Option B1: (baseline scenario): business as usual

Option B2: awareness campaigns and/or voluntary agreements with and between enforcement authorities in the Member States to clarify and agree on their respective roles and responsibilities and to enhance the information exchange and co-operation between them, both at national and cross border level.

Option B3: this option would envisage to specify the role of the different authorities involved in the enforcement of the type-approval legislation and to establish clear procedures for information exchange and co-operation between them to effectively mitigate the presence of non-compliant products on the market. These provisions would be aligned with those of Regulation (EU) No 168/2013 34 .

Option B4: joint actions by the Commission and the Member States, by:

–providing targeted training for enforcement authorities; and

–developing guidelines on the legal provisions for type-approval, conformity of production, recall of vehicles, safeguard measures and market surveillance.

Option B4 can either stand alone or complement Options B2 or B3 and goes beyond pure application of NLF provisions.

In responding to the ex-post evaluation study questionnaire, the majority of national authority respondents (75%) were in favour of joint actions by the Commission and the Member States as the most appropriate for addressing problems relating to the responsibilities of and co-operation amongst the different national authorities.

5.3Problem driver C: varying degrees of stringency and quality applied by technical services

Three possible policy options have been put forward in the impact assessment roadmap:

–Option C1 (baseline scenario): business as usual.

–Option C2: the around 250 technical services across the EU would be invited to sign a voluntary agreement which clarifies their respective roles and responsibilities and aims to achieve a uniform level of stringency in type-approval testing and verification of conformity of production. The agreement would include mechanisms for information exchange and co-operation between technical services, as well as define a body (or bodies) responsible for managing and monitoring the agreement. The awareness campaign would be aimed at disseminating the details of this agreement to technical services and economic operators.

In practice, this policy option would be difficult to define further, due to the non-representative number of responses received from technical services in the context of the impact assessment study, and unlikely to be effective for the following reasons:

–it appears there is no common understanding amongst TS either that there is a problem to be addressed or what the solution might be;

–because of this, the willingness of TS to sign up to a voluntary agreement is uncertain (especially for those which perceive they have nothing to gain);

–the ability of all TS to co-operate is also uncertain, given the large number of them involved and the question who should develop and monitor the agreement.

–Option C3: would envisage developing provisions to clarify and strengthen the requirements technical services have to comply with to be entitled to perform type-approval testing and verification of conformity of production. These provisions would in particular aim at clarifying the criteria governing the technical independence (e.g. technical services are not allowed to be the designer, manufacturer, supplier, installer, purchaser, owner, user or maintainer of the vehicles or devices tested) and their financial independence (e.g. 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). Alignment with the reference provisions of the NLF Decision and coherence with the provisions of Regulation (EU) No 168/2013 35 would be envisaged.

5.4.Problem area D: lack of clarity in safeguard measures & recall procedures

Three possible policy options have been put forward in the IA roadmap:

–Option D1 (baseline scenario): business as usual.

–Option D2: awareness campaigns and/or voluntary agreements with and between the different authorities in the Member States involved in the implementation and enforcement of the internal market legislation for motor vehicles to clarify and agree on their respective roles and responsibilities in post-market safeguard measures and recall actions, and the communication channels and procedures for exchange of information and co-operation.

Two points have to be noted with regard to Option D2:

–there are substantial similarities and possible overlaps between Option D2 and Option B2 (with the latter covering the overall roles and responsibilities of enforcement authorities, including those relating to post-market safeguard measures and recall actions).

–Option D2 cannot be used to improve the safeguard measures, primarily because a voluntary agreement cannot supersede a legally binding procedure involving decisions by the Commission.

For these reasons, Option D2 has not been assessed in detail in section 6 below. Any impacts relating to clarifying the roles and responsibilities of enforcement authorities have been captured under Option B2 (and Option B3) and the double-counting of impacts under two similar or at least interconnected options needs to be avoided.

–Option D3: amend the existing type-approval legislation relating to motor vehicles by including provisions to specify the role of and interaction between the different authorities involved in post-market safeguard measures and recall actions, as well as the cross border information exchange and co-operation between national enforcement authorities (type-approval authorities, market surveillance authorities, border control authorities, etc.).

In addition, changes to the current provisions on safeguard measures would be introduced, in line with the two step approach of the NLF Decision and as already incorporated in the type-approval legislation for motor cycles 36 . Under this approach Member States (or their approval authorities) would only be required to inform the Commission and other Member States of safeguard measures taken where they consider that the established non-compliance is not restricted to their national territory. In particular, the procedure to deal with safeguard measures taken at national level which give rise to objections from other Member States or the European Commission should be clarified.

5.5.Problem driver E: weaknesses in the procedures for ensuring conformity of production

Three possible policy options have been put forward in the IA roadmap:

–Option E1 (baseline scenario): business as usual.

–Option E2: awareness campaigns and/or voluntary agreements with and between the different stakeholders involved in the conformity of production (manufacturers, technical services and type-approval authorities in the Member States) to clarify and agree on the criteria and procedures to be applied for verifying and ensuring the conformity of production.

It should be noted that Options A2, B2 and C2 already consider the possibilities for introducing a voluntary agreement amongst economic operators, enforcement authorities and technical services respectively. Some of the key points made in that respect are summarised in Annex 6. .

Option E2 could also not be used to enhance the CoP provisions, because a voluntary agreement cannot replace the current requirements in Directive 2007/46/EC, unless the latter would be amended for that purpose through a regulatory initiative. In conclusion, option E2 has not been taken forward for further assessment

–Option E3: this option would envisage developing within the type-approval legislation on motor vehicles provisions to clarify and strengthen the CoP provisions, through the application of the principles and provisions of the NLF related to the verification of conformity during the production stage. These provisions cover the assessment of quality management systems for production, and product related controls through inspection and testing, under surveillance by the competent authorities 37 . The current provisions for ensuring CoP could be improved by incorporating the concept that the quality assurance system of the manufacturer has to be assessed by the type-approval authority (or an appointed body acting on its behalf) based on the detailed quality assurance system documentation to be approved by that authority or appointed body.

5.6.Specific needs for action

The specific needs referred to in § 3.1.5 have not been addressed in a separate option as it is considered that these needs can to a very large extent be covered in the policy options for the five problem areas identified (in particular with those concerning safeguard clauses in area D).

5.7.Instruments for the policy options

Each of the identified options for the five problem areas are considered to be fully in line with the proportionality principle as they envisage addressing regulatory failures in the automotive sector within the context of the overall policy objectives set out for the re-launch of single market strategy, in particular with regard to market surveillance, and by taking due account of the principles and boundaries of the horizontal framework for the marketing of products.

To enhance the harmonised implementation of the type-approval requirements by the Member States, and in line with the principles of smart regulation, it is envisaged to replace the FWD by a Regulation, directly applicable in the Member States.

6.Analysis of impacts 

6.1Problem driver A: insufficient traceability of automotive products and lack of clarity about responsibilities of economic operators in the supply chain

6.1.1.Summary of impacts assessed for the options under problem driver area A:

The baseline scenario (Option A1) would do nothing to address the current, estimated market share of non-compliant and unsafe products on the EU market. Responsible economic operators would continue to be disadvantaged by competition from less scrupulous operators. There would be no change to the lack of coherence in the implementation of the type-approval framework. There would be no costs associated with this option, but no benefits.

The self-regulatory option (A2) would provide clarity regarding the responsibilities of economic operators. However, neither voluntary agreements nor awareness campaigns are likely to affect the behaviour of less scrupulous economic operators. The coverage and enforcement of voluntary agreements is also uncertain, given that many SMEs in particular are not members of industry associations. The option would improve coherence with the principles of the NLF, and the costs would be low; however, there is considerable uncertainty that any benefits would be achieved.

The regulatory option (A3) is likely to be the most effective. It would provide legal clarity on the responsibilities of economic operators and clear rules on traceability of products are likely to assist enforcement authorities in taking effective remedial action against non-compliant and unsafe products found on the market. Overall the costs are likely to be outweighed by the benefits. (For more details on estimated benefits and costs, see Annexes 8 and 9)

6.1.2.Details of impacts assessed for the options under problem driver area A:

See table IA.1 of Annex 1 and Annex 9.

6.1.3.Assessment of effectiveness, efficiency and coherence of the options:

6.2Problem area B: lack of clarity about the responsibilities & cooperation of enforcement authorities

6.2.1.Summary of impacts assessed for the options under problem driver area B:

The baseline scenario (Option B1) would do nothing to clarify the responsibilities of enforcement authorities nor address issues relating to information exchange and cooperation between them. It would have no impact on the current, estimated market share of non-compliant and unsafe products on the EU market. No costs would be incurred with this option, but there would be no benefits.

The self-regulatory option (B2) would provide clarity on the roles and responsibilities of enforcement authorities. The extent to which actions would actually be modified from the current situation is highly uncertain; however, this option could reduce to some extent the current, estimated market share of non-compliant and unsafe products on the EU market. It would provide consistency with the NLF. Some costs would be incurred by the authorities in developing and implementing voluntary agreements, but these are likely to be balanced by the benefits of a reduction in the presence of non-compliant and unsafe products on the market and benefits to the authorities and economic operators from better communication.

The co-regulatory option (B3) would improve enforcement capabilities through training, while the guidelines would provide more clarity. Its effectiveness would be enhanced if it was combined with either the self-regulatory or the regulatory initiative. It would provide consistency with the NLF. The costs would be relatively low and would be significantly out weighted by the benefits generated through a further reduction of the market share taken by non-compliant and unsafe products.

The regulatory option (B4) would provide increased legal clarity for enforcement bodies regarding their responsibilities. Clear rules on information exchange and cooperation are also likely to assist enforcement. It will provide consistency with the NLF, which will be of particular benefit to authorities that are also responsible for other products already covered by the NLF. The costs incurred by stakeholders are likely to be outweighted by the benefits to stakeholders from the potential of reducing the market share of non-compliant and unsafe products.

6.2.2.Details of impacts assessed for the options under problem driver area B:

See table IA.2 of Annex 1 and Annex 9.

6.2.3.Assessment of effectiveness, efficiency and coherence of the options:

6.3Problem area C: varying degrees of stringency and quality applied by technical services

6.3.1.Summary of impacts assessed for the options under problem driver area C:

The baseline scenario would do nothing to address the disparities in the level of quality and performance of TS. Responsible TS would continue to be disadvantaged by competition from those that are less stringent and TS with other products in their portfolio would not benefit from consistency with the NLF. There would be no costs and no benefits under this option.

The potential impacts of a self-regulatory option have not been assessed in detail as, in practice, it would be difficult to agree and enforce a voluntary agreement across a large number of TS, especially where there appears to be no common understanding of the problem and no existing body to agree and enforce a VA. Because of this, even though the potential costs are low, they are still likely to outweigh the benefits which are highly uncertain, bearing in mind that the likely impact of self-regulation in encouraging less stringent TS to improve their performance is doubtful.

The regulatory option would provide increased legal clarity for TS on the requirements they need to meet. Although TS could incur some costs in ensuring legal, physical or personnel separation of conformity assessment from other activities, these costs are likely to be outweighed by a potential reduction in the market share of non-compliant and unsafe products. TS could also benefit from consistency with the NLF, if their portfolio includes other products covered by the NLF.

6.3.2.Details of impacts assessed for the options under problem driver area C:

See table IA.3 of Annex 1 and Annex 9.

6.3.3.Assessment of effectiveness, efficiency and coherence of the options:

6.4Problem area D: lack of clarity in safeguard measures & recall procedures

6.4.1.Summary of impacts assessed for the options under problem driver area D:

The baseline scenario would involve no change from the existing situation. However, there is some uncertainty over the significance of this problem area and it would also be partly addressed by the options for Problem Area B.

The self-regulatory option would not be practicable, as a voluntary agreements cannot supersede legislation and is unlikely to have sufficient legal standing in the event of a recall.

The regulatory option is unlikely to have a significant impact, unless it would result to a large number of challenges from other Member States in response to national procedures.

6.4.2.Details of impacts assessed for the options under problem driver area D:

See table IA.4 of Annex 1 and Annex 9.

6.4.3.Assessment of effectiveness, efficiency and coherence of the options:

6.5Problem area E: weaknesses in the procedures for ensuring conformity of production

6.5.1.Summary of impacts assessed for the options under problem driver area E:

The baseline scenario would do nothing to address the disparities in the quality criteria and procedures for CoP. The costs to stakeholders associated with this would continue and there would be no increase in coherence with the NLF.

The self-regulatory option would be unlikely to have a significant impact on the proportion of non-compliant and unsafe products on the market. It would be difficult to agree and enforce a voluntary agreement across numerous economic operators and TS and the need for a body to monitor and enforce a VA raises a number of legal, commercial and organisational issues which could increase costs. In addition, the options identified for problem areas A and B address the key responsibilities of economic operators, enforcement authorities and TS, which should also help to address this problem area.

The regulatory option is likely to ensure consistency and coherence with the principles and provisions of the NLF. While the vast majority of vehicle manufacturers are likely to have robust quality assurance (QA) structures in place already, this may not be the case for manufacturers of some vehicle parts and for some SMEs. These companies would incur some costs to improve QA structures; these costs are, however, likely to be outweighed by a potential reduction in the value of non-compliant and unsafe products on the market. Having a more robust QA system in place could also benefit economic operators, by increasing the efficiency of production and ensuring that fewer poor quality products are produced.

6.4.2.Details of impacts assessed for the options under problem driver area E:

See table IA.5 of Annex 1 and Annex 9.

6.4.3.Assessment of effectiveness, efficiency and coherence of the options:

7.Comparing the options 

7.1.Summary of impacts of the policy options assessed

The tables in section 6 provide a comparison of the policy options, against four key performance criteria:

–the potential effectiveness, in terms of addressing the general problem, the specific problem areas and/or enhancing enforcement of the type-approval legislation.

–the potential efficiency (or cost-effectiveness), in terms of the costs likely to be incurred in relation to the potential reduction in non-compliant and unsafe automotive products on the market.

–the coherence of the policy options, in terms of the extent to which the proposed intervention contributes to and/or mutually reinforces the existing type-approval framework

–the benefits associated with the policy options considered

The boxes with the policy options which rank best for each problem area are highlighted.

7.2.Preferred Combination of Policy Options

Given the overlap between the problem areas, a combination of policy options is likely to be the most effective in addressing the problems of non-compliant and unsafe automotive products on the market. From the result of the analysis of options in section 6, the preferred combination of policy options that emerges is as follows:

Self-regulatory initiatives by industry and enforcement authorities have been considered, but the analysis concluded that such an approach would be not sufficient for reaching to the fullest the initiative's objectives. This conclusion is based on the consideration that the improvements in the problem areas identified are unlikely to be effective and cannot guarantee a level playing field for all economic operators unless they are legally enforceable.

7.3.Comparison of impacts of preferred combination of policy options in terms of estimated reduction of the market share of non-compliant and unsafe automotive products 

This preferred combination of policy options could, based on the estimates 38 , reduce the value of the market taken up by non-compliant and unsafe products by between €656 million and €12 billion per year. The estimated impacts of each of the preferred policy options on the proportion of non-compliant and unsafe products on the market, compared with that of the separate policy options, is summarised in the table below.

It has to be stressed again that these figures only capture the approximate benefits of the reduction of market distortions caused by the presence of unsafe and non-compliant products. They do not reflect benefits in terms of reduced accidents, loss of life, environmental damage, etc. caused by these products.

The estimated value of the main costs for implementing the combination of preferred policy options is summarised in the table below:

Despite the high degree of uncertainty about the robustness of the estimates made for the benefits the policy options could generate, one can nevertheless conclude that in most cases, the estimated costs of implementing the options are at least an order of magnitude lower than the estimated benefits.

8.Monitoring and evaluation 

In order to identify the key indicators for monitoring progress and achievement of the aims of the intervention, it is important to bear in mind that any changes resulting from revisions to the framework Directive for the type-approval of motor vehicles, voluntary action and/or joint action are likely to affect consumers, the automotive industry and regulators. The indicators have, therefore, been chosen to reflect not only the regulatory intent of the intervention but also potentially negative consequences of the intervention, which may indicate a failure (e.g. an increase in court cases after introduction of a voluntary agreement).

The key indicators are as follows:

–changes in the views of/complaints from consumers received by enforcement authorities relating to motor vehicles and vehicle components;

–changes in the number/percentage of non-compliant and unsafe automotive products present on the EU market (e.g. compared with existing surveys);

–changes in the number/percentage of safeguard measures taken by EU authorities against non-compliant and unsafe products both from intra-EU and extra-EU manufacturers/importers (i.e. taking into account increased traceability requirements for automotive products);

–changes in trends in RAPEX notifications for vehicles; and

–changes in trends in voluntary recalls of motor vehicles (as an indicator for the effectiveness of the policy options retained in reducing the number of automotive products on the market representing a safety or environmental risk).

A reasonable timeline to review the selected indicators for monitoring and evaluation (taking into account the nature and effect of the preferred policy options) would be in five years after the revised Directive has come into force.

9.Annexes 

1) Tables

2) Case Studies

3) Acronyms used

4) General policy and regulatory context of the initiative

5) Schematic representation of the problem and its drivers, the consequences and the    policy objectives identified aimed at remedying the problem

6) Key considerations concerning the possible introduction of a voluntary agreement    amongst economic operators, enforcement authorities and technical services

7) Overall structure of the European automotive industry sector

8) Attempt to quantify the impact of the envisaged policy options: methodology used

9) Detailed assessment of the impacts of the policy options

Annex 1:

TABLES

Chapter 3: Problem Definition

Responses to the public consultation (IPM)

Table IPM.1

Table IPM.2

Table IPM.3

Replies to the Ex-Post Evaluation study questionnaire (EPE)

Table EPE.1

Table EPE.2

Table EPE.3

Table EPE.4

Table EPE.5

Chapter 6: Analysis of options

Impact Assessment study results (IA):

Table IA.1: summary of impacts assessed for options under problem area A 39

Table IA.2: summary of impacts assessed for options under problem area B 40

Table IA.3: summary of impacts assessed for options under problem area C

Table IA.4: summary of impacts assessed for options under problem area D 41

Table IA.5: summary of impacts assessed for options under problem area E 42

Competitiveness Proofing study results: (CP)

Table CP.1: competitiveness proofing results for option A3b

Table CP.2: competitiveness proofing results for option B3

Table CP.3: competitiveness proofing results for option C3

Table CP.4: competitiveness proofing results for option D3

Table CP.5: competitiveness proofing results for option E3

Annex 2: CASE STUDIES

Annex 3:

ACRONYMS

CARS2020    Action Plan for a strong, competitive and sustainable European car industry

CARS21    Competitive Automotive Regulatory framework for the 21st century

CLEPA    European Association of Automotive Suppliers

CLIMA    Directorate-General for Climate Action

CoP        Conformity of Production

CP        Competitiveness Proofing

ENTR        Directorate-General for Enterprise and Industry

ENV        Directorate-General for Environment

EPE        Ex-Post Evaluation

ETRMA    European Tyre and Rubber Manufacturers Association

EU        European Union

FC        Fitness Check

IA        Impact Assessment

IASG        Impact Assessment Steering Group

MAC        Mobile Air Conditioning

MOVE        Directorate-General for Mobility and Transport

MS        Member State

MVWG    Motor Vehicles Working Group

NLF        New Legislative Framework

ODETTE    Organisation for Data Exchange by Tele Transmission in Europe

PSMS        Product Safety and Market Surveillance

QA        Quality Assessment

QMS        Quality Management System

RAPEX    Rapid Alert System for Non-Food Consumer Products

REACH    Regulation on the Registration, Evaluation, Authorisation and Restriction of        Chemicals

RFID        Radio Frequency Identification

RTD        Directorate-General for Research and Innovation

SANCO    Directorate-General for Health and Consumers

SG        Secretariat General

SME        Small and Medium-sized Enterprise

TAA        Type Approval Authority

TAAM        Type Approval Authorities Meeting

TAAEG    Type Approval Authorities Expert Group

TCMV        Technical Committee – Motor Vehicles

TFEU        Treaty on the Functioning of the European Union

TS        Technical Services

UNECE    United Nations Economic Committee for Europe

WVTA        Whole Vehicle Type Approval

Annex 4:

General policy and regulatory context of the initiative:

4.1.General political context:

In 2010 the European Commission identified the re-launch of the single market as one of the strategic initiatives for its work programme, following the call made by President Barroso in his Political Guidelines of September 2009 43 for a major analysis of the "missing links" in the internal market, and for a plan to bring forward a major package of measures to re-launch the single market in time for the 20th anniversary of the 1992 project.

At the request of President Barosso, Mr. Monti presented in May 2010 a report on a new strategy for the single market 44 , in which he pleads for reaping the full benefits of the single market for goods. To maintain a dynamic and expanding single market for goods, the Monti report considers it necessary that the goods package adopted in 2008 is fully implemented, in particular with regard to the mutual recognition principle and market surveillance, and that the application of the principles of the NLF should be extended to other areas of product legislation.

4.2.    General regulatory context:

The NLF is designed to further facilitate harmonisation of EU legislation on the free movement of goods and includes two complementary instruments, Regulation 765/2008/EC on accreditation and market surveillance 45 and Decision 768/2008/EC establishing a common framework for the marketing of products 46 .

The NLF Regulation which lays down the main principles to be applied in the field of market surveillance and controls of products from third countries has become applicable on 1 January 2010.

The NLF Decision provides reference provisions which are to be commonly used in EU product legislation (e.g. definitions, obligations of economic operators, safeguard clause, etc.). These provisions aim at ensuring that internal market product legislation can be better implemented and enforced in practice. Defining clear obligations for economic operators in the supply chain is crucial to improve the functioning of the single market in harmonised product areas. The NLF Decision is designed as a toolbox containing the elements commonly used in technical harmonisation legislation in a standardised format. These elements should be used as consistently as possible in current and future internal market product legislation. Due to its “sui generis” nature the NLF Decision does not have legal effects for economic operators, individuals or Member States. To give practical effect to its provisions they need to be integrated into product specific legislation.

In 2013 the European Commission has proposed a new legislative package to improve consumer product safety and to strengthen market surveillance of products in the EU, including a proposal for a Regulation on Market Surveillance 47 , which aims, inter alia, at amending the NLF Regulation, to take account of the experience gained with the NLF.

The developments leading towards the adoption of the PSMS package by the Commission have been closely monitored with a view to ensure that if the PSMS package would be adopted by the Council and the EP, this would not entail the risk that the coherence in the approach towards market surveillance in the three main pillars of the type-approval framework for automotive products could not be ensured.

In order to avoid this risk, the Commission proposal for a Regulation on market surveillance of products included in the PSMS package provides explicitly in its recital (13) that “some Union harmonisation legislation contains provisions on market surveillance and safeguard clauses. These may be based on the reference provisions on market surveillance and safeguard clauses contained in Decision No 768/2008/EC on a common framework for the marketing of products. This Regulation should contain all of the market surveillance provisions applicable to the products falling within its scope. This Regulation should therefore include the reference provisions on market surveillance and safeguard clauses contained in Decision No 768/2008/EC. Provisions in existing Union harmonisation legislation that relate to market surveillance and safeguard clauses, whether drafted before the adoption of Decision No 768/2008/EC or based on its reference provisions, should be removed from that harmonisation legislation unless there are specific sectoral reasons for retaining them.”

As a result, Article 34 of the proposed Market Surveillance Regulation of the PSMS package does not include framework Directive 2007/46/EC in the list of legal acts to be amended through the adoption and entry into force of that Regulation. In addition, the same article 34 specifies that references to the provisions of Articles 15 to 29 of the NLF Regulation (EC) No 765/2008 shall be construed as references to this new Regulation. As the market surveillance provisions of the revised L- and T-cat Regulations are based on the NLF Regulation No 765/2008, and in view of the specific sectoral reasons to maintaining them, the same approach can be followed for proposing the introduction of market surveillance provisions as part of the review of Directive 2007/46/EC, without the risk of creating inconsistencies or overlaps with the PSMS package ( provided it will be adopted by the Council and the EP in line with the principles of the Commission proposal).

In view of the above and the uncertainty surrounding the adoption of the PSMS package by Council and European Parliament, the revision of the framework directive will use the relevant reference provisions of the NLF Decision as a basis. At the same time it is of utmost importance that for the introduction of market surveillance provisions in the type approval legislation for motor vehicles of categories M, N and O the same principles are applied as for the legislation already adopted for vehicles of category L and T. This to ensure the highest level of coherence and consistency across the respective pieces of internal market legislation for wheeled vehicles. Therefore, the starting point for this initiative are the reference provisions of the NLF Decision, where necessary adapted to take account of the specificities of the product sector concerned.

For addressing problem area A, the traceability requirements and responsibilities of the economic operators would be derived from the reference provisions of Chapter R2 of Annex I of NLF Decision No 768/2008/EC.

As for the regulatory option for addressing problem area B with regard to the responsibilities and co-operation of enforcement authorities, the proposals would be based on the principles of Articles 24 to 26 of NLF Regulation No 765/2008/EC, however with the necessary adaptations to take account of the pivotal role type-approval authorities have when the conformity of the product is put into question. These adaptations should be in line with the prionciples agreed by Council and European Parliament in the Regulations on the approval and market surveillance of motorcycles (L category vehicles) and tractors (T-category vehicles). It should be noted that these principles are a combination of legal requirements which stipulate how authorities should exchange information and co-operate, complemented by supporting and co-ordination efforts provided by the Commission.

For Area C, concerning the quality and performance of technical services the regulatory option will be derived from an implementation of the reference provisions of Chapter R4 of Annex I of NLF Decision No 768/2008/EC.

The regulatory option for the post-safeguard procedures (area D) will be derived from the reference provisions of Chapter R5 of Annex I of NLF Decision No 768/2008/EC.

Finally for the Conformity of Production procedures, the regulatory option will be derived from the implementation of some reinforcing elements provided for in the conformity assessment procedures specified in Annex II of NLF Decision No 768/2008/EC.

In conclusion, the regulatory options will not go beyond what is specified in the NLF Regulation and Decision, but will be adapted to the specificities of the sector (and in particular in view of the existence of an already well-established type-approval framework).

Annex 5: Schematic representation of the problem and its drivers, the consequences and the policy objectives aimed at remedying the problem

Annex 6:

Key considerations concerning the possible introduction of a voluntary agreement amongst economic operators, enforcement authorities and technical services

Agreement:    for economic operators, the viability of this option would depend on industry associations being able to reach a mutually satisfactory agreement on how to improve the procedures for conformity of production. This is likely to pose considerable difficulties, considering that the approval and/or co-operation of over 100,000 economic operators in the automotive sector would be required.

Coverage of the agreement: the proportion of small firms that are not members of these associations is high so these firms would not necessarily be able to participate.

Enforcement:    even if the approval of all participants is obtained, it is still uncertain whether the automotive sector will be able to adequately enforce any voluntary rules on all economic players on the market, bearing in mind that an increasing share of automotive products entering the EU market come from third countries. The global nature of the automotive industry, with some European manufacturers moving abroad to low-cost bases, means that it is also geographically difficult to monitor compliance with the voluntary agreement.

Compliance: non-complying manufacturers are likely to ignore any agreement and awareness campaigns will have little or no effect on those operators deliberately ignoring, or cutting corners on complying with, the rules. Therefore, this approach is unlikely to increase compliance rates. Where the industry is unable to enforce a voluntary agreement, it is possible that an even more uneven playing field could result in the market, between economic operators complying with the agreement and those flouting it. Also, because guidelines agreed within a voluntary agreement are by definition ‘non-legally binding’, there is no certainty that the responsibilities will indeed be taken up by all economic operators concerned.

Uncertainty of outcome: due to the voluntary nature of this option, the exact outcome (e.g. in terms of reductions in recalls and social impacts) cannot be quantified.

Commitment:    While around half of technical services accept that current CoP procedures can be improved, it is still the case that a significant proportion did not believe that it was feasible and cost-effective for TS to develop and enforce a voluntary agreement. TS that are already performing highly would be more likely to agree to this approach, while those struggling to comply would oppose or ignore it. In such a situation, there is little certainty that any clarifications agreed as part of a voluntary agreement will be taken up by TS, particularly those the initiative would be targeted at.

Enforcement amongst TS:    it has been questioned what would happen to TS who do not agree to sign up to the agreement, and who would supervise the implementation of the agreement. This highlights a need to have some form of sanctions and penalties, as well as an enforcement body or bodies, for the initiative to be effective, which would then bring it very close to a regulatory initiative.

Concerns of national authorities:    only a third of responding national authorities believe that it is feasible and cost-effective for them to develop and enforce a voluntary agreement.

Annex 7:

Overall structure of the European automotive industry sector:

1.Introduction - Key data on the automotive sector and its role in the EU economy

The automotive industry is one of Europe’s key industrial sectors with extensive and complex value chain linkages with large number of sectors inside and outside the EU. The total automotive sector – manufacturers of vehicles, bodies, trailers and components - had a turnover of €740 billion in 2010 with a value added of around €140 billion, representing about 8% of European manufacturing value added. Motor vehicles manufacturers reached a total turnover of €526 billion and employed around 1 million people in 2009. The components sector occupied 1.1 million with a turnover of around €190 billion in 2010 and the bodies and trailers sub-sector occupied around 175,000 with a turnover of €25 billion. In addition, another 4.2 million indirect jobs are generated in sectors related to the use of motor vehicles (sale, distribution, maintenance and repair, retail sale of fuel), and 4.9 million jobs in the road transport sector. In total, in 2010 it accounted for 13 million jobs, 5.6% of the total EU employed population in 2010. Furthermore, according to data from 14 Member States for the period 2009-2010, vehicles generated around €414 billion in tax revenues for the whole of the EU (including VAT, sales and registration taxes, excise duties on fuels), and this represented around 4% of EU GDP 48 .

Table 1.1.1
Basic figures of the automotive sector in the EU
(data for 2010 or most recent year available)

In 2010, a total of 17.1 million motor vehicles (passenger cars, trucks and buses) were produced in Europe, representing 22% of motor vehicles production worldwide 49 . In the passenger cars market segment European manufacturers represented 26% of the worldwide production in 2010, with a total of 15.3 million produced. In the commercial vehicles segment (vans, trucks, buses and coaches), EU is the third larger producer (1.8 million in 2010) behind US and China with a share of 9.3% of the total global production.

The financial crisis had a significant impact on the market for motor vehicles with a significant reduction in the level of cars registration and important production cutback measures adopted and capacity utilisation falling to 65% at the beginning of 2009. The total production of motor vehicles decreased by more than 30% of the pre-2007 levels in 2009, although it has picked up again since.

Table 1.1.2
Evolution of production, registrations of motor vehicles in the EU27
(number of units in millions)

Source: ACEA and OICA statistics, various years    

2.Overall structure of the automotive sector

The degree of integration of the sector into the European economy is indicated by the statistics on the structural characteristics of the sector:

There were 16 major car, truck and bus original equipment manufacturers (OEMs) in Europe operating in 2012 and 177 vehicle assembly and engine production plants, in 16 Member States 53 . 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 be found in certain smaller or niche segments of the automotive market including luxury cars, motor homes, trailers and semi-trailers, etc.

The European automotive supply sector includes around 3,000 companies, of which 2,500 are small or medium-sized enterprises that together employ over 3 million people. Typically, around 75% of a vehicle’s original equipment, components and technology are sourced from automotive suppliers.

In the tyres segment, 10 global tyre companies represent close to 66% of the total tyre production. 3 of these firms have their headquarters in the EU and they operate 82 manufacturing plants that produced 4.5 billion tyres in 2010, representing 26.5% of the world tyre production. According to data from the European Tyre and Rubber Manufacturers Association, from the total global sales of tyres of €150billion in 2010, 25% represented new motor vehicles tyres and around 75% replacement tyres.

3.Structure of the supply chain

The automotive industry has a ‘tiered’ supply chain structure. Upstream from the small number of global car manufacturers (OEMs) are the so-called Tier 1 suppliers. They 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 still rather large size firms with multiple production plants and in some cases they are active not only in the manufacturing of motor vehicles, but also in other sectors (electronics, mechanical and electrical engineering, information technology, steel, chemicals, plastics, metals and rubber, etc). SMEs can 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 mere spare parts, and are commonly developing components and share R&D costs jointly with motor vehicle manufacturers. In general there has been an increasing level of outsourced components and nowadays, according to CLEPA around 75% of every vehicle is made by automotive suppliers. Still, while there is an increasing trend for disintegration of the supply chain, in certain cases OEMs maintain control of the Tier 1 suppliers or develop their own proprietary hardware and software (e.g. powertrain management systems). Tier-1 suppliers typically have a plant close to the car manufacturers to support Just-In-Time type production processes although this is also determined by the balance between transport and production costs. In contrast, suppliers further upstream may be based anywhere in the world and the same generally applies to firms that offer specialised services like R&D and vehicle design.

Further upstream, 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 the supply directly to OEMs, representing an important share of the total spending of OEMs.

Downstream from the OEMs are the third party logistics providers that distribute finished vehicles to storage compounds and vehicle distribution hubs located around the world. These deliver to the franchised authorised dealers of cars.

4.Aftermarket industry sector

The motor vehicle sector is completed by the industry sector, known as the automotive aftermarket. According to data from the independent aftermarket association – FIGIEFA - this includes 765,000 companies with around 4 million employees and a total turnover in 2010 of around €890 million. It includes the authorised or independent manufacturers of spare parts and the relevant traders, the providers of maintenance and repair services– around one third linked to manufacturers and the remaining independent – and also vehicle repair companies, garage equipment manufacturers and engine remanufacturers and rebuilders. Table 2.1.3 summarises the data on the key segments of the motor vehicles aftermarket.

Table 1.1.3
Main data on the aftermarket sector (2010)

Source: FIGIEFA

Adopting a broader classification, the components manufacturers association (CLEPA) refers to a total size of the automotive spare parts’ aftermarket of around €100 million in sales. However, 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 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 to 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 aftermarket (85%) 55 .

5.Characteristics of the firms in the different segments of the sector

Data from Eurostat refer to individual enterprises rather than business groups of manufacturers. This is particularly important for the automotive sector, where large OEMs control a large number of enterprises operating in different countries. Still, the analysis of available data helps to illustrate the differing nature of the firms that dominate the various sub-sectors. Motor vehicle enterprises are predominantly large firms in comparison to body builders and trailer manufacturers that are dominated by small size enterprises with an average of 24 employees and €3.5 million average annual turnover. The parts and components sector – that includes all Tiers – has an average size of close to 100 employees. In the aftermarket segment the size of enterprises in much smaller - less than 10 employees per enterprise on average. Productivity and turnover levels are also markedly different in the motor vehicles sector in comparison to the other segments of the automotive market.

Table 1.1.4
Eurostat data on average size of enterprises in the automotive sector (most recent data available)

Source: Own elaboration on the basis of Eurostat data

6.R&D and innovation 

Investment in R&D and development of innovation represent a key aspect of the competitiveness of the EU automotive industry. The sector is Europe's largest private investor in research and development (around €20bn/annum) and this represents about 4% of the industry’s turnover and close to 30% of EU industry’s total R&D expenditure. In 2007 the EU automotive industry was the origin of more than 53% of the patents submitted to the European Patent Office, in comparison to the 21%, 15.6% and 0.4% of Japanese, US and Chinese manufacturers respectively 56 .. About 50% of R&D investment comes from automotive suppliers, as do the majority of the patents. However, there is significant difference in the level of R&D investment among EU countries. German firms spend six times more on R&D than those from France and Italy put together and get more patents that all other EU countries put together.

Green technologies are a particular focus area of the European car industry. European automotive firms are leaders in transitional drive-train and fuel technologies and are investing in various new technologies, such as battery-powered hybrid vehicles, electric vehicles and hydrogen.

7.National concentration of the sector inside the EU

Examining the distribution of 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 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 also 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 2.1.5) although countries like Slovakia, Slovenia, Hungary and Romania are gradually assuming a higher share of total production, especially in relation to parts and components.

Table 1.1.5
Volume of production of motor vehicles in the EU in 2010
number of motor vehicles and number of production plants by Member State

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 2.1.6).

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. Although still comparatively small, automotive production in the newer Member States increased by 25% in 2007 compared to the previous year and represented 15.2% of EU production (12.8% in 2006). This was driven by Foreign Direct Investment (FDI), which in 2006 represented around 22% of the total FDI stock of the manufacturing sectors for the countries of Central and Eastern Europe (CZ, HU, PL, SK, SL) 57 . 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.

Table 1.1.6
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)

Source: Eurostat Structural Business Statistics

8.Trade and trade partners

The automotive industry had a positive extra-EU trade balance of around €57 billion in 2010. The positive trade balance comes primarily from the passenger cars (€55 billion) and the heavy commercial vehicles segments (€2.9 billion). In the case of light commercial vehicles, the EU has a small trade deficit (€241 million in 2010), 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 €17billion in 2010. Germany is 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 came from Japan, Turkey, the USA and South Korea (ACEA).

Intra-EU trade in motor vehicles and parts has significantly increased since the introduction of whole vehicle type approval and the removal of technical requirements in 1992 and represents an important element in the overall level of intra-EU trade. The significant amount of FDI in Central and Eastern Europe – particularly since joining the EU – has also led to increased intra-industry trade in the automotive sector, that also suggests an increasing level of specialisation by the newer Member States and a gradual convergence of the structure of the automotive sector in the newer Member States with that of the older Member States.

9.Developments in the automotive sector and challenges for the EU automotive industry

The automotive manufacturing industry is facing a period of unprecedented change which has been accentuated by the financial crisis. The CARS 21 final report 58 points to a number of key challenges:

Growth of markets outside of Europe assuming increasing shares in the total global sales of motor vehicles. This 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. As a result there are significant changes in the structure of the automotive supply and value chain with significant logistical challenges for EU manufacturers.

There is increasing competition for the EU automotive industry on a worldwide scale, particularly from India and China that already have significant shares in their domestic markets and in other Asian markets. In these new markets low-costs cars are considered to have a significant growth potential. So far, there is only a limited presence of these manufacturers in EU markets – particularly in the passenger cars segment. However, EU companies are expected to be challenged more and more, both in the new markets and the home market.

In the commercial vehicles sector, and particularly heavy duty vehicles, emerging markets manufacturers represent more than 65% of total production and are achieving continuously increasing shares of the growing emerging markets 59 .

On the production side, 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 to the co-development and sharing of core production platforms 60 . Some manufacturers have also followed a strategy of ensuring that any given model is as close to being identical as possible in all world markets.

The introduction of more demanding long-term greenhouse gas targets as well as air quality objectives in the EU require further improvements to the internal combustion engine and the introduction of new and cleaner vehicle technologies, such as electric and hybrid propulsion systems. The use of financial incentives in a number of countries supporting the purchase of such vehicles reinforces this trends which also depends on technological developments and the price of fuels. There is however a high level of uncertainty as to how fast the new technologies will become dominant in the market. According to a number of market reports, the combustion engine is still expected to maintain its dominant share for some time to come, particularly in the fast growing emerging markets.

Acceleration of technical developments in a number of areas and an increasing integration of cars with ICT services via mobile systems that shift the market more towards the selling of mobility services than cars as such.

Significant shifts in consumers’ preferences and behaviour with a high focus on issues of safety but also web connectivity. There are also new mobility patterns developing – such as the use of shared cars – that can challenge the market structure.

In view of some of the challenges identified, the CARS 21 Final Report concludes that reinforcing the competitiveness of the sector constitutes the only way to preserve and develop employment in the EU in the long term. The report refers to the need for 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. It also refers to the need to develop new skill profiles and tackle the resulting changes in employment. Innovation is also identified as a key factor for maintaining the competitiveness of the automotive sector based on industry investment as well as public R&D support.

At the same time, better access to markets in third countries is considered to be key in maintaining the competitiveness of EU industry. The industry makes reference to a number of tariff and non-tariff barriers for access to some emerging markets (e.g. Korea, China, India). The 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.

Annex 8:

Attempt to quantify the impact of the envisaged policy options

1.Approach to quantification of impacts

Quantifying the impacts of the proposed policy options poses a number of difficulties. There is a lack of quantitative data on the extent of problems with the implementation and enforcement of the legal framework for the free movement of motor vehicles.

There is general agreement amongst stakeholders on the relevance of the problems, but less agreement on their significance.

The analysis involved a number of different steps:

determining the size of the market for products covered by the EU's technical harmonisation legislation for motor vehicles, their components and systems;

establishing the proportion of automotive devices on the market that are either unsafe or non-compliant with the type-approval legislation;

evaluating the likely contribution of each of the problem areas identified to the number of unsafe and non-compliant products on the market;

assessing the extent to which the policy options to address the problem areas would reduce the number of unsafe and non-compliant products on the market; and

assessing the proportion of vehicle recalls associated with unsafe and non-compliant products, the costs to different stakeholders associated with these recalls and the extent to which these costs would be reduced by the policy options.

The calculations of costs resulting from these steps are subject to considerable uncertainty, because of the number of assumptions that have had to be made and the limited data upon which they are based. Nevertheless, they provide an indication of the quantitative impacts of the policy options, and are provided here for information only.

2.Determining the size of the market:

See section 2.4 of the Impact Assessment report and Annex 7.

3.Establishing the proportion of automotive products on the market that are either unsafe or non-compliant:

The exact proportion of unsafe and non-compliant automotive products on the EU market is not known.

However, from the consultation of stakeholders in the context of the EPE study emerged that the majority of national authorities estimate that unsafe products account for more than 10% of automotive products on the market.

Based on this estimate, two scenarios are considered where unsafe automotive products account for between 5% (lower estimate) and 15% (higher estimate) of automotive products on the market. Applying these percentages to the relevant turnover of the EU automotive sector (see § 2.4 of the Impact Assessment report) and depending on the assumptions made about the size of the market affected, the market share of unsafe automotive products represents a value of between €5 billion and €30 billion.

It should be noted that these monetised figures only represent the value of the market share taken by non-compliant and unsafe products and do not include the costs of the consequences the presence of these products on the market may generate in terms of loss of life, injuries, harm to the environment, etc. since these costs could not be quantified. As such the monetised figures above and below are only indicative for the degree of distortion of competition that is caused by these products.

The exact proportion of non-compliant automotive products on the EU market is also not known. Depending on the sector of the industry considered, stakeholders consulted in the context of the evaluation study provided estimates ranging between 10 to 15% for multi-brand independent replacement parts, rising up to 50% for specific automotive parts. In the tyre sector it is estimated that around 10 to 12% of the 300 million tyres sold annually are non-compliant with EU legislation. The Fitness Check study found that it is mainly the spare parts and tyre sectors where non-compliant products may arise and, these are usually produced by non-EU manufacturers that tend to use technical services’ offices outside the EU. (see the two case studies in Annex 2).

National authorities consulted consider the percentage of non-compliant products to be less than 10%. In view of the above, and for the purpose of this attempt for a quantitative assessment, the same assumption has been made as for unsafe automotive products, by considering two scenarios where non-compliant automotive products are representing between 5% (lower estimate) and 15% (upper estimate) of the market. Depending on the scenarios considered this represents an estimated value of between with a value of between €2.5 billion and €30 billion.

In view of the above estimates and considering that non-compliant products to some extent are also a subset of unsafe products, this impact assessment has been carried out based on the scenarios as reflected in the table below.

4.Estimating the likely contribution of each of the identified problem areas to the number of unsafe and non-compliant products on the market:

The exact proportion of automotive recalls, non-compliant and unsafe products that could realistically be reduced by addressing the five identified problem drivers is difficult to ascertain.

An estimate of the likely effectiveness of the policy options has been made based on the judgement of stakeholders, by subdividing their verbal ranking into four categories:

highly effective;

effective;

uncertain; and

highly uncertain.

These verbal rankings have been transformed into a numerical ranking to estimate their likely impact on the percentage reduction in unsafe and non-compliant products that would result from the policy options.

These percentage are used in the estimates for the monetised value of the reduction in market share of unsafe and non-compliant products that could be generated by the respective policy options (see Section 6 of the Impact Assessment report).

5.Assessing the proportion of vehicle recalls associated with unsafe and non-compliant products, the costs to different stakeholders associated with these recalls and the extent to which these costs would be reduced by the policy options:

In a further attempt for quantification, an analysis of the underlying reasons for RAPEX recall notifications in the automotive sector and their relationship with the five identified problem drivers was made in the context of the IA study and resulted in the following findings (see table below).