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While draft guidelines favour consumers and independent service providers, they’ve infuriated dealerships and OEMs, which have slammed the proposals as dangerous, counterproductive and a threat to economic growth
While drivers may be jubilant about the possibility of having their cars serviced far more cheaply, multinational vehicle manufacturers are calling the Competition Commission proposals about the issue a “punitive approach”.
According to draft guidelines published in the Government Gazette, car owners can choose where to have a vehicle under warranty serviced and are not required to service it at manufacturer-approved dealers in order for the warranty to remain valid.
The movement Right2Repair (R2R), which fights for the rights of consumers in this regard, has welcomed the draft guidelines.
The Motor Industry Workshop Association (Miwa) and the SA Motor Body Repairers’ Association (Sambra) are thrilled about the additional choices consumers will have, as well as the opportunity that this will open for independent service providers.
Miwa represents more than 2 500 accredited general repairers, auto electricians, air conditioning and accessory businesses.
Sambra’s members are responsible for 80% of all repair work done in terms of insurance claims.
This week, Les McMaster of R2R told business radio show RSG Geldsake that an independent workshop can be between 30% and 50% cheaper than a manufacturer dealership, without compromising on the quality of parts or service.
According to McMaster, independent workshops have been struggling to survive because service plans run for as long as 10 years and the warranty is only valid if the vehicle is serviced at a dealership.
In Europe, about 60% of vehicles sold at dealers are sold without a service plan, and owners can have them serviced at independent workshops.
The commission said the guidelines would increase competitiveness in the after-sales vehicle market and would give smaller businesses and historically disadvantaged individuals access to the market.
But the National Association of Automobile Manufacturers of SA (Naamsa) has criticised the move in scathing terms.
Naamsa represents the seven original equipment manufacturers (OEMs), namely Toyota, BMW, Mercedes-Benz, Ford, Nissan, Isuzu and Volkswagen.
Michael Mabasa, the CEO of Naamsa, said the way in which the concept guidelines were published made a mockery of the conversations about transformation and reform that the association had conducted with the commission over the past seven months.
The guidelines, he said, would “change the existing business models of all multinational vehicle companies which invest in South Africa’s economy, workforce and future growth on an ongoing basis”.
The guidelines, in their current form, could have a massive effect on South Africa’s economy if they are not properly managed and gradually implemented, warned Mabasa.
A R6 billion Automotive Industry Transformation Fund was launched last year to support and extend black participation in the automotive industry supply chain.
The industry echoed Mabasa’s sentiments, saying the commission now wanted to force its hand and penalise it for transformation commitments it had already made and which were to be gradually implemented for the benefit of all stakeholders.
The commission said it had drafted the guidelines because of the following concerns: limited consumer choice; the alleged exclusion of independent workshops for maintenance, mechanical repairs and panel-beating of vehicles under warranty; alleged unfairness in the way work was awarded to workshops when it came to panel-beating; limitations on the sale of parts bearing the trademarks of OEMs to independent service providers; and obstacles that kept smaller and historically disadvantaged service providers out of the market.
. OEMs must inform consumers that it is not obligatory to have services, maintenance work, panel-beating repair work, nonstructural repair work and mechanical repair work done only at approved dealers and service providers;
. OEMs and/or approved dealers must allow consumers to use non-original parts where the warranty of a part has expired, without the rest of the vehicle’s warranty being voided;
. OEMs may not determine minimum retail prices for parts and components, and may not limit a service provider’s ability to sell parts;
. Vehicle and service plans may not be part of the transaction at the point of sale, but must be determined separately from the price of the vehicle;
. Consumers should be allowed to choose how long the motor plan for their new vehicle will be valid; and
. The motor or service plan must be transferable to a replacement vehicle if an insurer decides to write the vehicle off. If there is no replacement vehicle, the consumer must be permitted to cancel the value-add contract or get the balance back.
Mabasa said the draft guidelines, in their current form, could render President Cyril Ramaphosa’s message to investors – that government will create the necessary conditions for investment and growth – meaningless.
Naamsa regards the enforceable guidelines as a dangerous, counterproductive step that will damage the economy.
The vehicle industry contributes 6.9% to GDP and manufacturers provide work to more than 110 000 people.
Comment on the draft guidelines may be submitted until March 16, but Naamsa remains sceptical.
“We are very concerned and are justifiably sceptical about whether the commission will deign to look at our new representations, after it made such a dramatic U-turn over what Naamsa viewed as exceptionally constructive discussions about exactly these sorts of reforms.
“It is always difficult to lend legitimacy to a process which has already been finalised, before any of the key stakeholders have been afforded a reasonable opportunity to make their voices heard. We are convinced that these guidelines are the final version, and that the Competition Commission merely wanted to tick a box, so it gave us an opportunity to react.
“We have lost faith in the process and in the manner in which the commission is handling the reforms.”
Mabasa told City Press’ sister publication, Rapport, that Naamsa was consulting with its members about whether a collective reaction would still add any value to the process.
“Our message has clearly fallen on deaf ears, because the commission has now chosen to beat us with a stick and to use the guidelines as an inaccessible instrument to accomplish what we have all been working for.”
Naamsa called on the commission to reconsider its approach and to rather use the guidelines as an instrument for industry policy, to help stimulate economic growth and advance business confidence.
“Unfortunately, the trajectory that the commission has now chosen will likely have the opposite effect,” it said.
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