Twenty-four private comments were submitted in response to the first draft of the Code of Conduct for the automotive industry. “There were several interesting ideas and issues raised in these comments, many of which support the fundamentals of the Right to Repair (R2R) Campaign,” says Gunther Schmitz, Acting Chairman for Right to Repair SA.
Pricing dominated many of the comments with contributors saying they hope the code will end unfair pricing practices. Many allege that dealerships have been benefitting for years from maintenance and service plans at the expense of the consumer. One commented saying dealerships have been forcing consumers to comply by using threats of voiding the warranty. Another raises an issue he terms ‘manufacture banks’. This relates to the inordinately high targets the dealerships are forced to meet. These targets do not offer the retail customer the best deal and in many cases, the customer is coerced into weaker deals.
Schmitz says the current anti-competitive situation means inflated prices for consumers. “Extended warranties are locking consumers into periods where firstly, they have no choice but to use the dealer for repairs and secondly, they are at the mercy of dealers who can charge whatever rates they choose. R2R aims to allow consumers to select where their vehicles are serviced, maintained and repaired at competitive prices in the workshop of their choice. Ultimately consumers are being denied the right to have their vehicle repaired at a workshop of their choice. We believe this also inhibits the consumer’s right to support local business,” he says.
He highlights that insurance and how the code will affect the current status quo was also mentioned by several contributors. One comment stated that insurers are currently focused on lowering the cost of claims ratios. But vehicle manufacturers’ approvals are a stumbling block. The contributor says that the manufacturers list what repairers need to have in order to qualify as approved repairers to specific brands. These requirements generally include expensive and often unnecessary equipment. And they differ from manufacturer to manufacturer. Another contributor believes the code does not address the insurance industries direction of repairs and alleges that insurance companies are as guilty of directing repairs as manufacturers. A third believes insurance premiums will decrease dramatically if a code is passed.
Schmitz says there’s no doubt that the code will need to tackle issues surrounding insurance. “Interestingly at the Automotive Aftermarket Workshop, hosted by the Competition Commission, in March last year, Viviene Pearson, a representative for the South African Insurance Association (SAIA), pointed out that premiums are becoming unaffordable because of the price of repairs. She said that only 35% of cars in South Africa are insured because consumers are under pressure. Alternate quality parts do exist and could go a long way to bringing down the cost of insurance premiums if used in repairs.”
Schmitz says another interesting concept brought to the table was the issue of motor plans when vehicles are written off. A contributor points out that the manufacturer receives the full amount of the price of the motor plan in an upfront payment for future repairs and services on the day that the vehicle is sold. Should the vehicle be written off in the first few years, the manufacturer retains the full payment of the motor plan. Another contributor suggests that the manufacturer should be
obliged to refund the unused portion of the motor plan to the vehicle owner or the insurance company that settled the claim.
“The Competition Commission has addressed many of these issues in the draft code. It is going to be interesting to see how the manufacturers implement the Code to address these,” says Schmitz.
“There is a need for a fair and competitive regulatory environment that enables freedom of choice for consumers and gives aftermarket Small Medium Enterprises a chance to stay in business. South African legislature needs to follow international Right to Repair trends which promote South Africa’s existing consumer and competition laws. We believe that the Code will be a good starting point for this to happen,” he concludes.