A victory for consumers or a death sentence?

The Competition Commission is proposing a new, voluntary Automotive Code of Conduct, which the National Automobile Dealers’ Association (NADA) believes will be catastrophic to the vehicle industry. The Code proposes that vehicle owners can have their vehicles serviced at any workshop without breaching their warranty.

The initial reasoning behind the Code was to offer consumers more competitive prices. However, NADA points out that there are many other factors of the Code that cause harm to consumers and other road users. Chairperson of NADA, Mark Dommisse, notes that maintenance plans offered by dealers are aimed at empowering customers.

“South Africa doesn’t have a good culture of saving. Maintenance plans offer customers the opportunity to keep their vehicle in good condition at a set price despite the fluctuating rand. The South African vehicle industry is one of the most competitive in the world. It is unlikely that customers will be overcharged,” he says.

Customers with a maintenance plan can be assured that their vehicle will be fixed if something goes wrong. They are also assured that the parts used in the vehicle are genuine and are fitted correctly. The current draft of the Code sets no standards for the condition of independent workshops and allows for equivalent parts to be used.

These parts only need to be under warranty from the manufacturer. The minimum warranty period in South Africa is six months. These parts do not have to be subjected to testing by the South African Bureau of Standards (SABS). NADA is concerned that this will allow sub-par parts to be fitted on vehicles possibly by unskilled workers.

The same Code will apply to commercial vehicles, which Dommisse says is alarming. “This is a major public safety and consumer issue,” he notes.

The European Automotive Code of Conduct allows customers to make use of independent workshops rather than the dealership. However, these workshops have to be approved by the original equipment manufacturer (OEM) and staff need to be trained in fitting the parts. The latter is becoming increasingly important as vehicles become more complex with various aspects of technology.

Rather than focusing on the 20 percent of vehicle owners whose vehicles are under warranty, NADA suggests the Competition Commission focuses on ensuring the 80 percent of other vehicle owners regularly maintain their vehicles to ensure they are roadworthy. This will keep other road users safe and offer more business to independent workshops.

Another alternative to ensuring that road users can afford to maintain or service their vehicles is to make vehicle insurance compulsory. Brandon Cohen, compliance officer at NADA, notes that with compulsory vehicle insurance, premiums will, at least in theory, become more affordable.

“The principle of economics of scale argues that a higher insurance pool will mean lower cost of insurance. At the moment we only have a small number of insured vehicles on the road and many accidents,” he says.

NADA agrees with the principles that inspired the Code. “In general, we agree with the principles noted throughout the code. We object to the application and machinations of the code. The changes made to the second draft of the code have not taken on board the submissions made by NADA to the first draft,” says Dommisse.

He adds: “NADA and its members fully recognise the need to broaden participation in the automotive aftermarket sector and are committed to cooperating and assisting the commission to address matters of concern raised in the proposed new Code of Conduct.”

Read the full submission of commentary by NADA to the Competition Commission regarding the Automotive Code of Conduct here.