Car owners get the freedom to choose in 2021

From 1 July 2021 consumers will have more choice when they buy a car, with servicing options being expanded to  wherever owners want, without losing the warranties on their new vehicles.

This is one of the provisions in the final Guidelines for Competition in the South African Automotive Aftermarket, which was drafted by the Competition Commission to increase consumer choice and participation by smaller companies.

“These Guidelines are aimed at removing restrictions imposed by OEMs on car owners regarding service providers for service and maintenance, as well as replacement parts for vehicles according to international best practices. It will unleash entry and participation in the lucrative aftersales value chain by SMMEs and HDI owned firms,” says Tembinkosi Bonakele, competition commissioner.

More consumer choice

The guidelines want car manufacturers, known as Original Equipment Manufacturers (OEMs) to acknowledge and not impede the choice of consumers of where to service, maintain and repair their cars, regardless of whether the service provider is an approved dealer or an Independent Service Provider (ISP).

In addition, the guidelines are aimed at unbundling maintenance and service plans when a car is sold, by making it clear what the price of the car is and how much of the price is made up of the cost of the service and maintenance plan. Consumers can then choose if they want to buy the maintenance or service plan, to make servicing more affordable and improve competition.

Consumers will then also be able to choose original or non-original spare parts to be fitted by a service provider they choose, who do not have to be an approved dealer, motor-body repairer, or ISP during the in-warranty period.

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New market entry

The guidelines also makes provision for OEMs to adopt measures to support and promote market entry for new motor-body repairers, preferably those owned by Historically Disadvantaged Individuals (HDIs).

Service and maintenance plans

Another important change will be that OEMs and independent third-party providers will have to transfer a service and maintenance plan to a replacement car when the insurer writes it off, and if there is no replacement, the consumer must be able to cancel the plan or be refunded for the balance.

Pro-competitive measures

The guidelines were prepared in terms of section 77 of the Competition Act, to provide practical guidance to industry players on how to adopt pro-competitive measures in the automotive aftermarket and promote greater participation of small businesses, as well as historically disadvantaged individuals in the market.

The guidelines also make provision for consumer safety, a dispute resolution process, and a self-monitoring mechanism by industry stakeholders.

Industry reaction

Mikel Mabasa, CEO of The National Association of Automobile Manufacturers of South Africa (Naamsa), says his organisation, that is a driver and advocate for the automobile industry representing vehicle brands, has been working with the commission, and welcome the guidelines.

However, he says, the industry must still consider the guidelines to understand how it will effect OEMs and what to do to be ready when the guidelines take effect on 1 July 2021.

“It is a good thing and we will ensure that consumers also know what the implications are, such as choosing not to include the maintenance plan when you buy a car.”

Credit agreements will have to be redrafted and education and communication to inform consumers will also be a requirement.

Mabasa explains that where consumers now have no choice to opt out of a maintenance plan, they will have that choice with the new guidelines. They will also get an itemised price that shows how much they pay for the car and how much of the price is made up of the maintenance plan.

A car’s maintenance plan generally makes up 10% to 15% of the purchase price, depending on the manufacturer.

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The National Automobile Dealers’ Association (NADA) said in a statement it believes that the guidelines present a positive outcome for consumers and franchise dealers, bearing in mind that this document is a guideline that needs to be adopted by the industry as a whole.

“We are currently reviewing the final documentation and look forward to engaging in further productive discussions with the commission to fully understand its position on certain technical aspects of the guidelines.”

None of the OEMs, which comprise of Toyota, Nissan, BMW, Isuzu, Ford and Volkswagen wanted to comment, and referred all questions to Naamsa.

Dispute resolution

The guidelines make provision for dispute resolution by the Motor Industry Ombudsman of South Africa (MIOSA) and the National Consumer Commission (NCC).

MIOSA was established to assist in resolving disputes that arise in terms of the Consumer Protection Act regarding any goods or services provided by the automotive industry, including suppliers who are, in turn, also consumers within the industry supply chain.

MIOSA said in a statement that it is a neutral and independent adjudicator for the automotive and related industries.

Except for performing an alternative dispute resolution function for the automotive industry and consumers, MIOSA assists various provincial consumer protection offices with motor related complaints and provide them with technical advice.

They said: “The inception of the guidelines will not only have impact of the operations of the MIOSA in as far as the resources are concerned, but it will also increase workload drastically.”

Disclosure of interest: Ina Opperman is a non-executive director of the Motor Industry Ombudsman of South Africa.

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