Local vehicle manufacturers are outraged at proposed guidelines for the aftermarket industry that will allow consumers to select a workshop of their choice when having their vehicles serviced, maintained and repaired.
New vehicle owners are currently compelled to have in-warranty service, maintenance or repair work conducted only at approved dealers or approved service providers.
The proposed guidelines, which were published for public comment by the Competition Commission on Friday, also deal with the relationship between original equipment manufacturers (OEMs) and dealers.
Among other things, they state that OEMs must not impose onerous obligations on prospective dealers.
Grandiose ‘Taj Mahal’ type dealerships have become commonplace in South Africa.
However, the guidelines state: “The requirements for dealers must be reasonable and have an economic rationale, particularly in relation to the size of land, showrooms, furniture, fittings and finishes.”
Naamsa not happy
National Association of Automobile Manufacturers of South Africa (Naamsa) chief executive Michael Mabasa said on Monday that while the industry does not have any objection to any of the substantive reforms proposed in the guidelines, introducing these enforceable guidelines is extremely punitive and a dangerous retrogressive step that is counterproductive and will harm the economy.
Mabasa said the proposed guidelines will compel the automotive industry to implement enforceable measures that could fundamentally change the current nature and structure of the automotive retail and aftermarket value chains in the country.
He said they would also bring about some profound structural changes that would intrinsically remould the existing business models of all automotive multinational companies which continued to invest emphatically in the country’s economy, its workforce and its overall future growth.
Mabasa added that Naamsa believed the industry was gradually creating a fertile environment upon which reforms could be implemented without harming the economy.
He urged the commission to reconsider “its punitive approach” and rather use any guidelines it formulates as an industrial policy tool to stimulate economic growth and inspire business confidence.
“The trajectory chosen by the commission this time, regrettably, is likely to achieve the opposite outcomes,” he said.
‘Big win’ for consumers
However, Right to Repair SA (R2R), a Section 21 not-for-profit organisation that has been advocating for freedom of repair choice for vehicle owners, has welcomed the publication of the draft guidelines, adding that it is a positive move for the industry and a big win for consumers.
R2R chair Gunther Schmitz said it was encouraging to see such a strong focus on increased consumer choice, fair competition and competitive pricing – and that the increased transparency and freedom of choice for consumers would help grow small business.
The unbundling of maintenance and service plans from the purchase price of the vehicle at the point of sale is another win for the consumer.
Schmitz said that at point of sale, dealers and financiers must now provide the consumer with details of all inclusions and exclusions in their service and maintenance plans.
He said the draft guidelines pointed out that “this will allow consumers to exercise choice regarding whether to purchase the maintenance or service plan and make servicing a more affordable option for South Africans, while allowing for more players to provide such value-added services for consumers whose vehicles are in-warranty”.
“It is good for the industry and good for consumers who can now make informed financial choices,” he said.
Access to technical information
Schmitz said it was encouraging that the commission acknowledged that access to technical information remained a prerequisite for effective competition in the automotive aftermarket.
He said the commission was removing that obstacle by directing OEMs to share key technical information with independent service providers for both in-warranty and out-of-warranty motor vehicles.
In the introduction to the draft guidelines, the commission said it had over the past decade received complaints regarding restrictive agreements between OEMs and various automotive aftermarket industry participants, including dealers and insurers, across the value chain.
It said some of the competition concerns identified were:
- The exclusion or foreclosure of independent service providers in the markets for the service and maintenance, mechanical repairs and motor-body repairs of in-warranty motor vehicles;
- Unclear and allegedly unfair allocation of work by insurers in the allocation of motor-body repairs;
- Restrictions on the sale of OEM branded parts and components to independent service providers;
- High barriers to entry that exclude small and historically disadvantaged persons from becoming authorised dealers; and
- A lack of competition and consumer choice in the sale and fitment of spare parts.
The commission said the guidelines were directed at addressing constraints to competition in the automotive aftermarket industry and to promote compliance with the spirit, intent and objectives of the Competition Act by encouraging relevant stakeholders to adopt and promote principles of effective competition regulation for a growing and inclusive economy.
It said the specific objectives of the guidelines were to:
- Promote principles and remedies that lower barriers to entry and ensure that a greater number of firms have an opportunity to undertake service and maintenance work, mechanical repairs and motor vehicle repairs within the period covered by the vehicle’s warranty;
- Increase consumer choice and facilitate competition and competitive pricing in the markets for new vehicles, spare parts and value-added products;
- Increase transparency and facilitate consumer choice in relation to the service, maintenance, mechanical and motor-body repairs of vehicles.
The guidelines aim to achieve these objectives by encouraging stakeholders to adopt measures that:
- Widen the pool of approved service providers who can undertake in-warranty service and maintenance work, in-warranty mechanical repairs, and in-warranty motor-body repairs;
- Ensure that independent service providers can undertake in-warranty service and maintenance work and in-warranty motor-body repairs;
- Allow for greater consumer choice and product competition in the retail of service plans and/or maintenance plans; and
- Ensure the fair allocation of motor-body repairs among approved service providers based on their competitive merits such as service, quality of work and price.
Stakeholders have until March 16 to submit formal comments on the guidelines.
Brought to you by Moneyweb