New Automotive Code Set To Shake Up The Sector


New Automotive Code Set To Shake Up The Sector

Freedom of choice for motorists, a fairer trading environment for after-market suppliers and service providers, and a job-creation boost for the economy.

The Competition Commission’s proposed new code of conduct for the South African automotive industry is set to usher in groundbreaking changes for car owners, automotive aftermarket businesses, and the economy as a whole. The draft was published in September 2017, with a final round of feedback and submissions received on September 11, 2018.

The proposed code will give car owners the right to repair or service their vehicles at a provider of their own choice, without voiding their warranties.

At present, South African car owners are typically locked into using a vehicle manufacturer’s service centres and parts departments because of the embedded motor or service plans.

This is very different from the rest of the world. In countries such as the US, car owners can buy a motor or service plan separately from their car, giving them greater choice.

Organisations such as Section 21 company Right to Repair South Africa (R2RSA) – which was founded by the Motor Industry Workshop Association (MIWA) and represents 2 500 independent workshops, automotive aftermarket distributors and parts manufacturers – want car owners in this country to have the same level of choice.

South Africa’s Competition Commission has already come a long way towards responding to this call. Its latest draft of the proposed new codes seeks to address competition constraints in the automotive aftermarket industry by, for example, ensuring that: “independent service providers can undertake in-warranty service and maintenance work and in-warranty motor-body repairs”.

The code also seeks to 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.”

A key element of the code is that there should be “no unfair restrictions on the sale or distribution of original spare parts; allowing greater consumer choice in choosing suitable spare parts for repairs and maintenance of their motor vehicles”.

Transformational element

The code will be unique in a global sense in that it has a strong transformational element pushing for historically disadvantaged individuals to own more dealerships and other businesses in the local automotive sector.

Original equipment manufacturers (OEMs) will have to promote the entry of historically disadvantaged individuals into their networks of service by, for example, subsidising capital, and providing facilities, tools, equipment, and training.

While the code will be voluntary, the likes of R2RSA will monitor and flag any transgressors.

Overall, the proposals are expected to create a more level playing field in the aftermarket sector and provide a much-needed boost for the 8 000 independent workshops in South Africa, which employ thousands of South Africans.

History has shown that when big monopolies dominate economies, they don’t create jobs. South Africa, the most unequal country on earth according to the World Bank, is experiencing this first-hand. Entrenched monopolies are a feature in several sectors, and the unemployment rate stands at 27.2%.

If we want an economy that is creating jobs, we must support small to medium enterprises (SMEs), such as the thousands of independent workshops scattered across the country.

Studies by the International Finance Corporation show that SMEs account for more than half of all formal jobs worldwide.

This is why efforts by R2RSA and the Competition Commission in respect of the right to repair could become an example of how South Africa is able to open up its economy and make it more inclusive.

Filum Ho is vice chair of Right to Repair SA and CEO of Autoboys, SA’s first black-owned national glass and collision parts provider. It is 51% owned by African Rainbow Capital (ARC).

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New Automotive Code Set To Shake Up The Sector