Why the right to repair policy is good for entrepreneurs

The right to repair policy is good for entrepreneurs because it gives consumers the choice of where they want to take their cars for repairs or services. This also creates new opportunities for entrepreneurs who want to buy a franchise.

“Franchised businesses in the automotive products and services sector can play an important part in offering opportunities for entrepreneurs to be part of a growing sector that has further opened up as a result of government’s right to repair policy,” says Fred Makgato, CEO of the Franchise Association of South Africa (FASA).

The right to repair rule allows owners of new vehicles to have them serviced or repaired at any independent provider they choose since 1 July 2021. This means that the consumer cannot be ‘locked’ into warranty or service plans from the dealership when buying a new vehicle.

Makgato was speaking at the announcement that FASA will partner with the Automotive Industry Development Centre – Eastern Cape (AIDC-EC) to organise and take part in the Eastern Cape Auto Franchise & ‘Right to Repair’ Indaba this week where the spotlight will be on one of franchising’s 14 business sectors, the Automotive Products & Services Category.

“We look forward to leading the discussion on what franchising can offer and why it is the best option for nurturing entrepreneurship, in skills training and in job creation.”

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Need for right to repair

Makgato says used car sales soared during the pandemic and new car sales picked up since then as well. “Car owners will always need car services, auto body repairs, new tyres or reconditioned batteries. The question is who to go to for reliable and efficient service: a franchised auto service or a backyard mechanic?”

He pointed out that while both have their place in a competitive market, the franchise model offers a tried and tested business with high standards – a business format that the backyard mechanic should consider switching to.

Despite the devastating effects of the pandemic and its economic fallout, new vehicle sales in South Africa maintained their climb in July 2022, which is reassuring, according to the Automotive Business Council (NAAMSA), increasing by 6.2% compared to the previous month although exports declined slightly from June.

However, sales and exports surged, but from an extremely low base as July 2021 was marred by the riots in KZN and parts of Gauteng. The July 2022 new passenger car market at 31 455 units registered an increase of 10 517 cars, or a gain of 50.2%, compared to the 20 938 new cars sold in July 2021.

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Right to repair ensures inclusion, transformation and job creation

Thabo Shenxane, CEO of AIDC-EC, says that is good news for the automotive aftermarket and some experts are predicting a growth of 5.5% expected until 2023 as a result of the ‘right to repair’ policy which opens up opportunities for existing and new entrants, most notably small-sized businesses.

The sector has shown strong growth since the early 2000s and the introduction of the right to repair policy is expected to significantly affect the aftermarket retailers as well as the repairer industry.

By reducing barriers to entry, this policy will encourage new entrants into the market and raise competition among industry players, expected to lead to more competitive pricing for the service and repair of vehicles with a factory warranty.

Shenxane says the automotive aftermarket sector is a channel for inclusion, transformation and job creation that will help industry and government reach the South African Automotive Masterplan Targets aimed at achieving these key objectives. Franchising is one of the models used for empowerment.

“The new guidelines for the automotive aftermarket provide unprecedented access to new players. At the same time consumers will still require quality replacement parts as well as diagnostic tools and test equipment, which can often be most easily accessed by new entrants through franchising.”

According to Pertunia Sibanyoni, FASA Chairperson, franchising has always been ahead of the curve and this new right to repair policy will open the doors for a variety of new franchise opportunities in the auto aftermarket space on all levels, from the sophisticated state-of-the-art auto services and products and car sales to formalising the backyard mechanics.”