Automotive at

1, London Street, Reading, RG1 4PN t: 0118 951 6200 f: 0118 950 2704 www.fsp-law.com

Automotive Quarterly update—February 2017. Automotive companies have featured heavily in the news since the last quarterly went to press.

Much of that news focused on risk and regulatory issues - ongoing investigations into bribery and corruption persist in

Germany, EU guidance has been released to help Member States evaluate if car manufacturers use defeat devices and,

perhaps most significantly to readers of this quarterly, there has been a sustained assault on the diesel engine (which

make up nearly one half of EU car sales). That is:

• Sadiq Khan wants to ban them from London (and Paris, Mexico City, Madrid and Athens are set to do likewise)

• Chris Grayling, Transport Secretary warned, last week, against buying a diesel vehicle; and

• The government’s chief medical officer, Dame Sally Davies, said on Radio 4’s “Today” Programme that diesel cars

should be phased out to cut the tens of thousands of deaths caused each year from air pollution.

Diesel car sales are suffering. Official figures stated that 78,778 diesel cars were sold in January 2017, a drop of 4.3% on

the same month last year.

In response, Mike Hawes of the SMMT pointed out that the way to address the issue of diesel air pollution was to “make

diesels cleaner”, not ban them from cities or phase them out altogether:

“The diesel engines of today have got immeasurably cleaner than those of yesterday… What we need to do is continue to

improve them so that you can address the NOX emissions in the same way that we’ve addressed the particulate emissions,

sulphur emissions, lead in petrol and so forth – it’s an evolution in technology… The challenge to the industry is to get the

newer vehicles on the road as quickly as possible.”

One thing is for certain, whilst environmental issues are not likely to feature highly in the USA under the Trump

administration, the position in the EU is in stark contrast and it seems likely that the microscope will stay on the diesel

engine for some time yet.

Finally, given that a recent survey found that the majority of consumers weren’t aware of changes to the new car VED

regime coming in April, now seems a timely reminder to all dealers and related parties that under the new system, two

thirds of the AFVs that currently qualify for the £0 standard rate will now be subject to an annual flat rate charge of £130, in

addition to varying levels of first year tax. Meanwhile, those with list prices above £40,000 – which will include some of

these new technology vehicles – will also have to pay an annual £310 premium car surcharge.

As ever, I hope that the content of this quarterly (which focuses on recent regulatory issues and the issue of salary

sacrifice) are of interest and if there is anything you would like to see covered off in the next quarterly, please do call or

email the writer, tom.maple@fsp-law.com.

February 2017

Readers may be aware that the Competition and Markets

Authority (CMA) was planning to investigate allegations that

BMW UK was restricting its dealers' use of the price

comparison website to list new BMWs and MINIs.

The investigation was proposed after carwow made a

complaint to the CMA in 2016. However following carwow's

referral BMW announced that it had changed its UK policy and

so the CMA decided, in January 2017, not to pursue the matter

any further.

Although the case has been dropped without the CMA making a

decision as to whether BMW's policy breached competition law,

it seems that car manufacturers have to accept that price

comparison websites have a place to play in the market as they

help to promote competition by allowing consumers to

compare the prices for new cars offered by different dealers

rather than having to spend time travelling around and

negotiating with individual dealers.

If you would like further advice on the above please do not

hesitate to contact Cathrine Ripley.

(DDI 0118 951 6285/ cathrine.ripley@fsp-law.com).

ULEVs

For the purposes of the new rules, ULEVs are vehicles with

emissions under 75 grams of CO2 per kilometre. The emission

level for exempt ULEVs may be updated in future, to be

consistent with any changes to the treatment of these vehicles

within the car benefit charge.

Options before 5 April 2017

It is anticipated that there will be a huge rush in salary sacrifice

car benefit tax up between now and 5 April, when the new rules

come into force.

Anyone taking a new salary sacrifice car in the period up to 5

April 2017 will have the arrangement protected until 2021. But

from 6 April 2017 new agreements for salary sacrifice can only

gain tax benefits if the car has ultra low exhaust emissions.

If you would like further advice on the above please do not

hesitate to contact Philippa Roles.

(DDI 0118 951 6371/ philippa.roles@fsp-law.com).

Price comparison websites for

new cars are here to stay

As we say goodbye to salary sacrifice incentives making company

car ownership tax effective, we welcome in an era of increased

tax incentives for leasing ultra low emission vehicles.

Up until now, the use of salary sacrifice arrangements in

employment has enabled employers to give their employees a

little something extra in the form of tax effective purchases of

every day items. Salary sacrifice arrangements enabled an

employee to surrender part of his salary in return for a non-cash

benefit, such as a leased company car. The tax effectiveness of

the arrangement was achieved by taking the cost of leasing the

car from the employee's gross (pre-tax) salary, thereby reducing

the amount on which income tax and National Insurance was

paid.

All Change

The scheme has benefitted thousands of drivers, but soon will be

no more. In the 2016 Autumn Statement the Government

announced that:

“…employees swapping salary for benefits will pay the same tax

as the vast majority of individuals who buy them out of their post-

tax income.”

So with that the Government will be removing the tax and

employer National Insurance advantages of salary sacrifice

schemes from 6 April 2017.

The only areas of the old salary sacrifice arrangements that will

remain unaffected by the culling are arrangements relating to

pensions, childcare, Cycle to Work and Ultra Low Emission

Vehicles (ULEVs).

Existing Contracts

Current salary sacrifice contracts where the arrangement does

not relate to cars and/ or accommodation and/ or school fees will

be allowed to continue operating under the pre-April 2017 rules

until the earlier of:

(i) the contract end date;

(ii) the modification of the contract;

(iii) the renewal of the contract; or

(iv) April 2018.

In the case of salary sacrifice arrangements for cars and/ or accommodation and/ or school fees the April 2018 cut-off is extended to April 2021.

Company cars & the end of salary

sacrifice

The automotive industry can be a stressful environment.

When performance, misconduct and other workplace disputes occur it

is not uncommon for the employees involved to be signed off with

stress. These employees will qualify as disabled and be protected

from discrimination if they can show they have a mental impairment

which has a substantial and long-term adverse effect on their ability to

carry out normal day-to-day activities.

A recent case in the Employment Appeal Tribunal (EAT) offers helpful

guidance on when stress might amount to a disability.

The case concerned an individual who was on long-term sick leave due

to workplace stress. He brought claims alleging disability

discrimination by his employer, relying on stress to establish a

disability. An employment tribunal determined he was not disabled and

the claimant appealed.

The EAT upheld the tribunal’s decision. Focusing on stress, it echoed

the tribunal’s findings that his stress was largely a result of

unhappiness about what he perceived to have been unfair treatment

and that he had provided little or no evidence that his stress had any

effect on his ability to carry out day-to-day activities. It held that he had

failed to establish that he was disabled as he did not establish a

mental impairment nor the requisite substantial long-term adverse

effect.

The EAT explained that there is a distinction between a clinical mental

impairment and what is simply a reaction to life events.

Automotive employers across the industry will welcome this decision,

which confirms that the burden rests with employees to show that

their work-related stress has a substantive and long-term adverse

impact on their day-to-day activities. The decision also suggests that

without appropriate supporting evidence, a doctor’s note referring to

‘stress’ will not on its own be sufficient to establish a disability.

However, employers should still be proactive when an employee is on

long-term sick leave due to stress. Maintaining an appropriate level of

contact and obtaining a medical report will help employers assess the

practical impact of an employee’s stress and whether or not it may be

sufficiently serious to qualify as a disability.

If you would like further advice on the above please do not hesitate to

contact Ian Machray.

(DDI 0118 951 6225/ ian.machray@fsp-law.com).

In January 2017, the Ministry of Transport began a consultation

about changing the date of the first MOT test in Great Britain for

cars, motorcycles and vans from 3 years to 4 years. The

consultation is open until 16 April 2017, read more.

The proposals are designed to bring the UK in line with other

european countries including France, Ireland, Italy and Spain, as

well as Denmark and Norway who have the first test at 4 years

(although others such as Germany, the Netherlands and Sweden

remain at 3).

The government is considering two options: (i) extend the first MOT

for all vehicles which require an MOT test at 3 years to 4 years, or

(ii) eliminate vans from the changes, meaning they will still need

their first MOT test at 3 years.

Whilst this may be good for the consumer, it is likely to have

significant ramifications for MOT Test Centres and dealers alike.

If it isn’t broke…

The government says that modern cars stay roadworthy for longer

and therefore can wait a longer period before an MOT test becomes

necessary. They cite in support stats that show that more than 2.2

million cars are presented for their first MOT test every year, but

the number of three or four-year-old cars involved in accidents

where vehicle defects were a contributory factor has fallen by

almost two-thirds, from 155 in 2006 to just 57 in 2015.

The government predicts that the plans, which could come into

force as early as next year, could save motorists an estimated £100

million every year. However, whilst certain consumers are set to

benefit, 22,700 garages and MOT test centres that carry out the

MOT test will have to find a way to generate a significant income

stream. The government’s response is simple:

Businesses will have to diversify and find new areas of work to

cover the shortfall in MOT testing and repair work.

It is not only garages and test centres who are worried, AA

president Edmund King remarked "The downside is that we are

likely to see more cars with faulty tyres and lights slipping through

the net…”

Notwithstanding the cost to test centres and the risk of an

increased number of cars on the road which are not roadworthy,

change appears likely. In this regard, the government says that

subject to its public consultation, the changes will come into effect

in 2018.

The government has also said that it's considering how appropriate

the current MOT test fee is - A separate consultation on this is

likely later in the year.

The MOT times they are a changing Workplace stress and disability

In late September 2016, the EU made it mandatory that all new

passenger cars (of no more than nine seats) and light goods

vehicles (of under 3.5 tonnes) must, from 31 March 2018, be

equipped with 112-based eCall in-vehicle systems. On 17 January

2017, the EU (i) set out the relevant technical requirements and test

procedures and (ii) the conditions for its implementation with

regard to the privacy and data protection of users.

The Need for Change

28,000 people are killed and more than 1.5 million injured in 1.1

million traffic accidents on EU roads every year. The economic

cost of these catastrophic accidents across member states is

around €130 billion every year.

Those behind the movement for change estimated that 112 eCall

could speed up emergency response times by 40% in towns and

cities and 50% in the rural areas. The resultant effect, it is believed

is a reduction in the number of fatalities by 4% and severe injuries

by 6%.

eCall

Once fitted, 112 eCall will, in the event of a serious road accident,

automatically dial 112 and communicate the vehicle's location to the

emergency services. eCall is activated automatically as soon as in-

vehicle sensors and/or processors (e.g. the airbag) detect a serious

crash. eCall will also be available manually by pushing a button in

the car (for example by a witness to a serious accident).

Privacy and Data Protection

As previous readers of our Automotive Quarterly will know,

widespread reform of the laws relating to Data Protection is

coming into effect in 2017, read more. Manufacturers must

therefore ensure that the 112-based eCall in-vehicle systems are

not traceable and not subject to any constant tracking. 112-based

eCall in-vehicle systems must not be available for communication

in their normal operational status and the data in their internal

memory must not be available outside the systems to any entities

before the eCall is triggered.

Manufacturers will have to implement adequate safeguards to

protect the security of the data in the internal memory of the

system from unauthorized access or misuse.

Technology—112 eCall to be

mandatory from 31 March 2018

In this regard, any data processed through the 112-based

eCall in-vehicle system must be “adequate, relevant and

proportionate” to the purposes for which the data is

collected and processed.

From a dealer and hirer perspective, consumers will have

to be provided with comprehensive and reliable

information with regards to the 112-based eCall system

and in particular the way data is processed and protected.

If you would like further advice on the above please do not

hesitate to contact Joshua Kanakam.

(DDI 0118 951 6276/ joshua.kanakam@fsp-law.com).

The Real Driving Emissions (RDE) test, which will

determine whether a new vehicle model is allowed to be

put onto the market, is still on track to be introduced from

1 September. The new test will be used in addition to the

current laboratory New European Driving Cycle testing

procedure, which is also due to be updated. Under the

RDE test vehicles will be driven on public roads and

exposed to a wide range of different conditions which is

expected to give a more realistic and stringent approach to

the measurement of pollutant and CO2 emissions testing

in the future.

Further legislation governing emission testing on all new

vehicles will follow, however the key aspects such as the

stringency of the limits and the dates of implementation

are still under consultation, leading to uncertainty for

automotive manufacturers. The European Commission

chose to introduce the legislation, which will have major

implications for the automotive industry, in multiple

packages and so proper planning by vehicle

manufacturers will be a difficult task, and in some cases

manufacturers will have only a few months’ notice to

comply.

If you would like further advice on the above please do not

hesitate to contact Laura Williams.

(DDI 0118 951 6233/ laura.williams@fsp-law.com).

Real driving emissions test

Changes for the independent aftermarket

The EU Block Exemption and “Euro 5” is designed to ensure that access to repair and maintenance information (RMI) is

made available to independent operators by vehicle manufacturers. Keen to keep up to speed with developments, in

particular the ever increasing use of tech in vehicles, the EU has been looking into the effectiveness of the current Regs -

Its latest report was published and adopted on 9 December 2016.

The Report concludes, amongst other things, that to be competitive independent repairers need to be able to access the

technical information necessary to repair vehicles not least due to the greater complexity of vehicles, the growing number

of parts and greater use of on-board electronics. Indeed, the future of the aftermarket will be driven by access to new

‘digital services’, both directly in the workshop or via remote access.

The report concluded that certain obstacles persist, the result of which was weakened competition between authorised

and independent repairers and therefore an uneven playing field. Change is around the corner therefore… well maybe not.

Back to the Future - 2017 and Beyond

The current vehicle type approval framework legislation is presently being reviewed. However, independents are

concerned by the current proposed amended legislation. For example: (i) independents are concerned by the omission to

reference to the 16 pin connector and pass-through programming for passenger cars and (ii) the fact that a study

requested by the European Commission by Ricardo-AEA regarding whether the vehicle manufacturers were correctly

implementing the Euro 5 legislation detailed a number of non-compliances and made certain recommendations as to how

the legislation should be updated. However, these recommendations have not been incorporated.

Following a detailed analysis of the technical requirements to ensure an ‘interoperable, standardised, secure and open-

access’ platform providing remote access to in-vehicle data, the Commission has appointed TRL to assess three possible

solutions: (i) to enhance the in-vehicle interface; (ii) to develop a data server platform (would include the manufacturers’

‘extended vehicle’ concept that controls all access to the vehicle data); or (iii) to improve the standardised in-vehicle open

access platform.

Pending TRL’s report, no changes to the legislation will be made. Indeed, the TRL changes, if any, are seen as a separate

and future requirement that will be influenced by other investigations into other key issues such as the single digital

market, data platforms, data privacy and vehicle cybersecurity. Change could be a long way away therefore.

Independents are concerned that if the changes are not brought in quickly, and vehicle manufacturers restrict access to

vehicle and in-vehicle data, the independent aftermarket is disadvantaged and, ultimately, consumer choice of where a

vehicle is serviced and repaired. How the EU responds to lobbying by interested parties will be of interest to

manufacturers and the independent aftersales market alike.

If you would like further advice on the above please do not hesitate to contact Tom Maple. (DDI 0118 951 6309/

tom.maple@fsp-law.com).

This Automotive Quarterly is provided free of charge for information purposes only; it does not constitute legal advice and

should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary

set out in the article, or for any consequences of relying on it, is assumed or accepted by Field Seymour Parkes LLP.

1, London Street, Reading, RG1 4PN t: 0118 951 6200 f: 0118 950 2704 www.fsp-law.com

Meet the team Tom Maple

Partner - Head of Automotive

t: 0118 951 6309

e: tom.maple@fsp-law.com

Dean Bickford

Partner

t: 0118 951 6271

e: dean.bickford@fsp-law.com

Cathrine Ripley

Partner

t: 0118 951 6285

e: cathrine.ripley@fsp-law.com

Joshua Kanakam

Solicitor

t: 0118 951 6276

e: joshua.kanakam@fsp-law.com

Penelope Garden

Partner

t: 0118 951 6312

e: penelope.garden@fsp-law.com

Ian Machray

Partner

t: 0118 951 6225

e: ian.machray@fsp-law.com

Alex Illingworth

Senior associate

t: 0118 951 6275

e: alex.illingworth@fsp-law.com