If the competition Commission’s code of conduct for the automotive industry is implemented, it will “have a catastrophic effect” on the R48billion industry, and it will compromise consumer safety.
This is the view of Mark Dommisse, the chairperson of the National Automobile Dealers Association (Nada), who says although the investigation into the after-market activities of the auto industry was necessary, if the code is implemented as it stands, it will have an adverse impact on consumer safety, the economy and job creation.
Nada represents 85% of new franchise dealerships and qualifying used-vehicle outlets.
The crux of the code is that it will decouple car owners from dealerships, giving them the right to repair or service their vehicles at a provider of their choice without voiding their warranties. Currently, car owners are typically locked into using a vehicle manufacturer’s repair shops and parts because of embedded motor or service plans.
Nada gave their input when the code’s first draft was published for comment. Dommisse says their proposals were not taken into account in the second draft.
“If the automotive industry is to continue to contribute positively to the economy, all stakeholders need to develop a meaningful code. The document in its current form is fraught with issues that need to be addressed,” Dommisse says.
A sticking point is that the approval of parts by the South African Bureau of Standards has been removed.
“We believe this is irresponsible, and we have to ask how the industry will ensure that quality parts are used in consumers’ vehicles, or who will police the process at independent workshops. If the industry is not required to use genuine or approved parts, the safety of passenger vehicles, heavy commercials, trucks and buses will be at risk,” says Dommisse.
He says the code as it stands will have a “catastrophic effect on investment and employment in this important sector of our economy”.
“South Africa has 1600 franchised automotive dealerships worth R48bn. It employs 60000 people directly and a further 25000 people indirectly, and the greater automotive industry employs more than a million people in the formal sector.
“In a country with 25% unemployment, why would the government want to destroy it? The South African motor industry is one of the country’s success stories, and its benefits are far-reaching.
“The franchised dealer sector plays an important role in developing the industry and its technicians by providing world-class training and exposure to global industry best practice. Many technicians leave to start their own businesses, or move to other workshops, acquiring invaluable skills on the journey.
“We believe manufacturers have the right to determine the standards of those who service their products in the same way Boeing does with airliners, or Apple with its exclusive products. Dealers’ businesses have to meet global manufacturer standards, and it takes years to establish a return on investment. Nada supports opening the market slowly and responsibly, and we can help,” Dommisse says.
South Africa does not have a culture of saving. Household debt ratios are increasing and the rand is extremely volatile. Against a backdrop of rising household debt, Dommisse says a plan that provides servicing and maintenance for two to five years, at today’s exchange rate, is critical to the consumer.
“Service and maintenance plans, which are built into the vehicle purchase price, are beneficial. The volatility of the rand should be a real concern for motorists. In 2011, the rand was seven to the dollar. It is now almost 14 to the dollar. Securing parts at current exchange rates is a wise move in light of a service plan’s lifetime,” Dommisse says.
Ultimately, it is about the safety of the consumer.
“There is no quality control of alternate parts coming into the country. If the industry is not required to use genuine or approved parts, there can be no monitoring of safety standards. There are bound to be many claims, compliance will be unmanageable and disputes will prove to be onerous.
“If independent workshops are going to use quality parts, made by [approved] manufacturers (such as Bosch or Denso) and of the same specification, it might one day, in theory, be acceptable. However, it is unlikely that all independent workshops will use these parts due to their high cost, and I doubt that manufacturers will allow this during warranty. They will probably use generics that fit, but have not been tested the way original parts are.”
Franchised dealers offer their staff significant technical training, welfare, pension and insurance benefits, and wages higher than the legislated minimum wage. They require extremely expensive tools, calibration machines and diagnostics equipment. It takes many years to establish a return on investment.
The Competition Commission failed to respond by the deadline despite several reminders and a promise to do so.