SA automotive sector is heading for an overhaul
New guidelines from the Competition Commission should result in cheaper repairs and services for vehicles, and more choice in where to have them done.
Author:
8 December 2020
A KwaZulu-Natal car owner recently drove his Mercedes-Benz two and a half hours to the nearest Mercedes dealership, which was situated in Shelly Beach. The gearbox had been giving him trouble and he wanted a professional mechanic to look into the problem.
At the dealership, which trades as Garden City Motors Shelly Beach, his car was hooked up to the diagnostics machine and he got the news that the valve gear control unit had to be replaced. The total quote was R46 096; the car owner was in shock. Luckily, he decided to get a second opinion. With that obtained, the car was repaired within a few days for R3 500. So why did Garden City Motors quote R46 096?
Andre Bekker, a service manager at the dealership, was asked for comment but has not responded to calls and emails. Mercedes-Benz South Africa insisted that it could not comment on behalf of a dealership.
The car owner’s experience is a perfect example of why the Competition Commission feels the need to intervene in the markets for vehicle maintenance and repairs. If the owner’s car had still been under warranty, the chances are he would have been forced to get it repaired at the dealership and would be severely out of pocket, even though his car didn’t need such costly repairs.
The commission published draft guidelines for the maintenance and repairs markets in February this year, and the period for comment closed in March. Commission spokesperson Siyabulela Makunga said in November that the final draft of the guidelines was going through “internal processes, including a legal review”.
Makunga says the guidelines provide practical guidance for the automotive aftermarkets industry that are intended to promote inclusion and encourage competition through the greater participation of small businesses as well as historically disadvantaged groups.
Practices scrutinised
What this means is that certain practices in the automotive sector, such as being forced to repair or service your car at the dealership from which it was purchased or risk voiding your warranty, should be a thing of the past. It will also mean that car owners will have greater choices when it comes to keeping their car on the road in working order.
“The Commission will still urge the public to lodge complaints and notify it of any anti-competitive conduct within the industry,” said Makunga. “These complaints will be considered and investigated within the enforcement framework as set out in the Competition Act.”
The commission said originally that the guidelines had been triggered by “multiple complaints” it had received from various independent players in the automotive aftermarket as well as members of the public. “These parties raised concerns about alleged anti-competitive practices, such as pricing behaviour in the automotive aftermarket, and agreements that foreclose independent players at all levels of the automotive value chain,” it stated.
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A number of the complaints were about the widespread practice of excluding independent service providers from servicing or repairing cars that are still in warranty with a dealership.
Makunga said the commission also received complaints about the alleged unfair allocation of work by insurers, and restrictions on the sale of original spare parts to independent service providers.
Makunga said the lack of transformation in the automotive sector was also a “great concern” for the commission. “One of the purposes of the Competition Act is to ensure that small and medium enterprises have an equitable opportunity to participate in the economy and to promote a greater spread of ownership, in particular, to increase the ownership stakes of historically disadvantaged individuals,” he said.
Levelling the playing field
The guidelines to prevent the exclusion of independent service providers aim to offer consumers choice for in-warranty service and maintenance work to their vehicle, without affecting the warranty’s validity. The commission argues that original-equipment manufacturers must approve any service provider that meets their standards and specifications to undertake such services during the warranty period.
Guidelines aimed at insurers insist that “a fair allocation of work” must take place among their approved service providers. For instance, insurers must broaden the allocation of work to independent service providers, offer consumers a choice of approved repairers within their geographic area, and refrain from entering into exclusivity arrangements with service providers within a designated geographic area.
The commission has also drafted guidelines that allow the consumer to choose between original and non-original spare parts without the risk of voiding the warranty. The guidelines state that original-equipment manufacturers and approved dealers must make original spare parts and components available to independent service providers, except for parts that are linked to a vehicle’s security systems.
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It also proposes unbundling the sale of maintenance and service plans from the purchase price of the vehicle. “At the point of sale, dealers and financiers must provide the consumer with details of all inclusions and exclusions included in the service and maintenance plans,” states the guidelines. “This will allow consumers to exercise choice regarding whether to purchase the maintenance or service plan.”
The commission argues that this will make servicing a vehicle more affordable for consumers and allow for more players to provide such services to them, without voiding the warranty on a vehicle.
Two other issues that the Commission’s guidelines tackle are the sharing of technical information and access to training between original-equipment manufacturers and independent service providers.
Consumers will benefit
The draft guidelines have been welcomed by Right to Repair South Africa (R2RSA), a non-profit organisation advocating freedom of choice for vehicle owners. It described the guidelines as a “positive move for the industry and a big win for consumers”.
“This is such a positive step for consumers,” said R2RSA chairperson Gunther Schmitz. “We want an environment where consumers can select where their vehicles are serviced, maintained and repaired, at competitive prices and in the workshop of their choice.”
Schmitz said the proposed unbundling of maintenance and service plans from the purchase price of the vehicle would be a victory for consumers. It would make servicing a car more affordable for more South Africans and allow for more service providers.
“Essentially, these new guidelines have the ability to make it cheaper for South Africans to maintain and keep a car on the road,” said Schmitz. “It is encouraging to see such a strong focus on increased consumer choice, fair competition and competitive pricing. It is good for the industry and good for consumers who can now make informed financial choices.”
