Opinionista Filum Ho 22 March 2019

Consumer rights: Why a new motor code will strengthen SA car owners’ rights

Consumers can welcome a proposed new code that will empower car owners with the right to repair or service their vehicles at a provider of their own choice without voiding their warranties. It is a much-needed change that is long overdue, but some in the industry with entrenched monopolistic interests are resisting these changes.

Buying a new car is certainly one of the biggest consumer choices you’ll ever make in your life.

Apart from deciding on which car suits your personal needs and style, you also need to bear in mind critical issues such as your maintenance and warranty plans.

But when it comes to this latter point, our country’s new car owners are at a fundamental disadvantage compared to their counterparts in other parts of the world.

This is because owners of new cars in South Africa are typically locked into using a vehicle manufacturer’s repair shops and parts in what is called embedded motor or service plans. If you as an owner of a new car decide to repair or service your vehicle at an independent provider, your manufacturer will unfairly void your warranty.

South Africa is unique in the world in this regard as the likes of the US, Europe and Australia have done away completely with this outdated practice.

However, the Competition Commission’s newly planned automotive code of conduct for South Africa will do away with embedded motor plans in our country and usher in groundbreaking changes for the automotive industry, consumers and the broader economy.

At its heart, the newly proposed Code of Conduct which is still in final draft form and yet to be officially released will empower car owners with the right to repair or service their vehicles at a provider of their own choice without voiding their warranties.

It further seeks to boost competition by creating new opportunities for SMEs and allowing more black participation in the industry, opening up a new frontier for much-needed economic growth. Aftermarket automotive players will be able to service new vehicles, sparking greater competition and choice for the consumer.

While many in the automotive industry are hailing the code as a much-needed change that is long overdue, there are others with entrenched monopolistic interests who are resisting these changes.

As a result, there are several controversial claims out there that have been made by opponents to the code recently, which I will seek to briefly challenge here.

The first widely cited claim is that aftermarket providers already have 80% of the national service and repair business and that they, therefore, don’t need to access the 20% of the market that consists of new cars.

My response here is that 100% of cars start out their lives as new cars in the market. Car manufacturers and their franchises also control 100% of 20% of the new car market, giving them huge clout over pricing on a key funnel segment — thereby creating a monopolistic environment.

South Africans who want an open and fair economy shouldn’t tolerate protecting 20% of the market for a small group of players. We need greater competition across every segment of the automotive sector — not protectionism.

Another major claim perpetuated recently by the anti-motor-code lobby is that independent and aftermarket providers aren’t equipped or ready yet to service the new car market.

My response here is that there are plenty of high-quality aftermarket workshops that have invested in their tooling over the years and it isn’t fair that they are excluded from working on in-warranty vehicles. They are waiting in the wings to provide a high-quality alternative.

If there are any sub-standard providers, they will simply steadily stop winning business from customers owing to market forces. But the key point here is that we need an open market for this to happen and for new, highly efficient players to enter the space.

Finally, opponents to the code also regularly make the assertion that independent and aftermarket players won’t use quality parts made by approved manufacturers which are of the same specification as their Original Equipment (OE) counterparts.

Here again, the fact is that many independent workshops are actually already using quality parts by approved big-name auto parts manufacturers.

This is because these parts manufacturers typically sell exactly the same part to new carmakers as well as the aftermarket and independent workshops. The only difference is that the part which goes into new cars is branded with the auto part manufacturer’s logo while the aftermarket part is not. But other than this, it’s exactly the same part — with the same specification.

It is claims such as these that risk diverting attention away from a key development that could change the South African car market for the better.

Fundamentally, it’s about strengthening consumers’ rights while opening up what has traditionally been a fundamentally closed part of the economy to thousands of SMEs.

More than ever, our economy needs hope and jobs. And the proposals in the motor code offer the country exactly that. DM


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