SA Car Dealers at Risk of Being Disingenuous

Unlocking SA’s auto sector potential: It’s time to look closer to home

by Filum Ho

Motor dealership bodies have recently presented some highly debatable views regarding the Competition Commission’s new draft guidelines for the automotive industry.

On 14 February 2020, the Commission published guidelines which stipulate that consumers will no longer be compelled to conduct in-warranty service, maintenance or repair work only at approved dealers or approved service providers.

Unsurprisingly, representatives of the car dealership industry — who for decades have benefited from restrictive warranties and unfair competition — are now crying foul.

Below are four myths being repeated by dealership bodies that need to be debunked.

Myth #1: ‘Anti-consumer’

In recent statements, Mark Dommisse of the National Automobile Dealers’ Association (NADA) has repeatedly said the Commission’s draft guidelines are “anti-consumer”.

How can freedom of choice, greater transparency in pricing for motor plans, as well as a wider selection of service providers ever be negative for the consumer? As part of the guidelines, the consumer will be able to choose an independent service provider or continue using an Original Equipment Manufacturer (OEM) dealership when it comes to repairs and servicing. This same principle goes for parts.

All that is set to change is that a consumer will have the right to choose without having their warranty voided. If anything, the new guidelines are overwhelmingly pro-consumer.

Myth #2: ‘Negative consequences for OEMs’

Mr Dommisse has further said the guidelines will have “negative consequences” for OEMs and dealerships in South Africa. The fact is that OEMs in places such as the EU, US, UK and Australia have not been allowed to bundle a motor plan into the selling price of a vehicle for many years now. Added to this, OEMs in these parts of the world do not void a warranty if the consumer decides to repair or service their vehicle at an independent service provider.

I’m curious to ask what makes South Africa so special that everything will fall apart for OEMs and dealerships if these globally accepted practices are implemented here?

Myth #3: ‘Threat to road safety’

Another myth being perpetuated by Nada is that the guidelines represent a “threat to road safety standards”. How is making repairs more affordable for the everyday person counterproductive to road safety?  If anything, making repairs more accessible will increase the percentage of roadworthy vehicles on the road.

Myth #4: ‘Carmakers should be treated like aircraft makers’

In another statement, Nada’s Dommisse says: “OEM and importers have the right to determine the standards of those who service their products, in much the same way that Airbus and other aircraft OEM do with aircraft, and to ensure the strict maintenance of those standards.”

This is like comparing apples with oranges. Aeroplane ownership is completely different to car ownership as it is mostly clustered to a few big airlines and even fewer airline makers (primarily Boeing and Airbus). In contrast, there are 15 million vehicles on the road in South Africa, consisting of a vast array of brands and parts. There are literally thousands upon thousands of independent service providers accross the world that have a proven track record of being able to service vehicles in a more than competent manner. The same will happen in South Africa if we level the playing the field.

As a final point, the likes of the National Association of Automobile Manufacturers of South Africa (Naamsa) has repeatedly agreed with the Commission that greater transformation is needed in our sector. However, Naama have also repeatedly said that the industry is not ready for that right now. What they really fail to acknowledge is that transformation means nothing without access – and this is exactly the problem that the draft guidelines seek to tackle.  We need independent service providers to be able to access the market to allow for true transformation and growth of our sector. 

For too long, South Africans have tolerated these outdated views and they have literally paid the higher price. Consumers are starting to realise this and, hopefully, the final guidelines will reflect the much-needed change that our industry needs to move forward.

SA Car Dealers at Risk of Being Disingenuous