Automotive code of conduct skids on oily patches

It has been more than a year since the Guidelines for Competition in the SA Automotive Aftermarket were published in June 2021. It proposes that in-warranty cars may be serviced at independent dealerships, plus other changes.

Recently the Competition Commission, which implemented the code, started an educational campaign visiting automotive hubs and workshops of independent service providers (ISPs). These include panel beaters and other small and medium-sized enterprises (SMEs) in the automotive aftermarket chain. The aim is to give clarity on any issues that arise. We caught up with the teams at an ISP in Boksburg.

The code was championed by the Right2Repair organisation that called for improved transparency and competition in the motor repair industry.

The guidelines took more than three years to finalise. Motor companies (otherwise known as original equipment manufacturers, or OEMs) and independent workshops had been at loggerheads over the issue for the past few years, with OEMs fearing the new rules may threaten their profitability and that of franchised dealerships, and Right2Repair lobbying for increased transparency and freedom of choice for consumers.

According to the guidelines, new-vehicle owners would no longer have their warranties automatically voided by having their vehicles serviced at non-franchised workshops, or fitting non-original spare parts.

Maintenance and service plans were also to be unbundled from a vehicle’s purchase price, though thus far only Ford has done so.

Accusations of unfair allocation of work by insurers, restrictions on the sale of original spare parts to ISPs, high barriers to entry that exclude SMEs, including historically disadvantaged individuals (HDIs) from becoming approved motor-body repairers and approved dealers were also levelled at the industry. This included a lack of competition and consumer choice in the sale and fitment of spare parts also mentioned.

The journey towards transforming the industry continues but faces various challenges, with some OEMs seemingly not co-operating, according to Karabo Motaung, principal analyst at the Competition Commission. 

The automotive code of conduct does not allow ISPs to work on any OEM warranty-related repairs. Only franchised dealers will handle work covered by vehicle warranties, such as mechanical failures, but routine service and maintenance is open to all providers. Only 20% of cars on SA roads are under warranty, according to National Automobile Dealers’ Association (Nada) chairperson Mark Dommisse.

To ensure fair competition, motor manufacturers are also compelled to provide technical information on their vehicles to independent workshops. The ISP I visited with the Competition Commission said access to this information is being restricted, with exorbitant funds usually charged by OEMs

On this matter, the Competition Commission’s analyst says OEMs must find ways to ease the expense for ISPs, with suggestions that OEMs create training systems in exchange for nominal, market-related fees. Where the allocation of work to smaller service providers is concerned, the commission says they are busy with a number of investigations on complaints of this nature.

Among the objectives of the Automotive Code of Conduct is the opening up of the industry to new entrants, with a specific eye to creating more black-owned ISPs. The Competition Commission falls under the Economic Development Department (EDD), whereas it is the department of trade, industry & competition that looks after the transformation targets.

Seemingly, these two independent departments have not converged on the Automotive Code of Conduct to offer transformation guidelines, especially for SMEs. Motaung says the code in its current state does not cater to small enterprises, rather more established business. 

Challenges and contrasts

Despite clear targets, the Automotive Code of Conduct is in stark contrast to the Competition Commission’s noble pursuits, some OEMs have informed Motor News that consumers continue to show preference of their bundled add-ons.

An accredited independent workshop owner informed us that though he works on in-warranty cars, he limits this to routine service work such as oil changes. He sends away business for more technical repairs, advising customers to stick with OEMs to avoid the frustrating back-and-forth consultation between the ISP and OEM should a serious issue with a vehicle occur.

The commission is handing out educational publications on the automotive aftermarket that should be put up in the workshops and other public spaces. These contain information on what the guidelines mean for different stakeholders, including consumers, ISPs, OEMs, insurers and approved dealers.

The commission will be approaching more OEMs with a view to scrutinising any infringements on the competition laws. Motaung advises companies to ensure compliance.